Brussels, 12/06/2013 (Agence Europe) - In a letter published in the Cypriot media on Tuesday, the president of Cyprus, Nicos Anastasiades, makes a number of comments to the troika of lenders (European Commission, European Central Bank and International Monetary Fund).
Anastasiades urges the troika to draw up a long-term solution to the cashflow problems of the country's biggest bank, Bank of Cyprus (BoC), so that it can back the real economy. A source says tha,t in reaction to the silence from the three troika bodies, the Cypriot finance minister, Harris Georgiades, will be writing to each of his eurozone partners in the hope of getting the matter discussed at the Eurogroup meeting of Thursday 20 June.
“It is my humble submission that the bail-in was implemented without careful preparation”, says Anastasiades in the letter. The bail-in also failed to distinguish between long-term, high-interest deposits and money simply transiting through corporate bank accounts, much of which was raided. In addition to that, the restrictions on the movement of capital make business difficult, there is lack of trust in the banks, the recession is worse than expected and this all makes it difficult to implement budget consolidation measures.
In the letter, Anastasiades says that Cyprus has been treated unfairly. The stringent bank deposit conditions have done more harm than good, he says, and: “The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus's turn to seek help”. BoC has incurred an additional €9 billion of debt to the ECB through Laiki, but did not receive the €3.8 billion collateral for that loan. The president points out that the granting of more than €4 billion in emergency funding by the ECB in very doubtful circumstances led to runs on the capital of Cypriot bank branches in Greece, and the transfer of €9 billion of debt to BoC, €3.8 billion of it unguaranteed, jeopardises the BoC's future.
Anastasiades recommends converting this debt into long-term bonds in a separate entity and suggests that the Eurogroup reverse its decision to transfer Laiki's good assets (and debt) to BoC. The ECB and Commission say they have received the letter, but refuse to comment. The ECB has the power to decide on its own about converting the debt into long-term bonds, but it is highly unlikely that the Commission will agree to challenge the decisions taken in March. (EL/transl.fl)