Wednesday

24th Apr 2019

EU handling of Greece forced Cyprus bailout, minister says

  • Vassos Shiarly (c)- 'If you ask me whether this was a fair way to deal with it, I dare say No' (Photo: consilum.europa.eu)

Cyprus has lashed out that short-sighted and German-led thinking by negotiators of Greece's bailout deal has forced the Mediterranean island into asking for euro aid that it would otherwise not have needed.

"Effectively because of our close proximity (to Greece) we were called upon to pay a very heavy price because of our financial connection," finance minister Vassos Shiarly said Friday (6 July).

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Cyprus' major complaint that holders of Greek bonds take a loss on their investment - something insisted on by German Chancellor Angela Merkel. This hit Cypriot banks - heavy lenders in Greece - hard.

"Private sector involvement initially worked around a 75 percent haircut. But effectively the total loss for any Greek sovereign bond holder was in the order of 81 percent." The total loss for Cypriot banks amounted to €4.2bn, around 24 percent of GDP .

"If you ask me whether this was a fair way to deal with it, I dare say no," said the minister, indicating that the consequences should have been "borne in mind" at the time.

According to Shiarly, if Cyprus share had been "fairly evaluated" in terms of GDP, Cypriot banks would have taken a loss of €200m. "Petty cash" these days.

The issue is to feature strongly when Cyprus starts negotiations on the terms of its bailout.

"We would like to talk to our fellow Europeans and make sure they understand the unfairness by which this particular issue has been dealt with."

Officials from the European Commission, European Central Bank and International Monetary Fund came to the island earlier this week to look at Nicosia's accounts. Negotiations on the terms of the deal and the amount - speculated to be around €10bn - will start soon.

Shiarly says that while additional funding for 2012 is not needed, "liquidity is a problem" as it is no longer possible to renew short-term treasury bills.

The finance minister also indicated that Cyprus will fight to keep its low corporate tax rate (10%), which has "substantially helped" the economy.

Here it takes comfort from bailoutee Ireland - where many similarities are drawn - whose low company levy survived the EU-IMF inspectors and was not made a part of its reform programme.

The island may also get a loan from Russia although the minister insisted that Nicosia had "never requested" a loan but only "made an enquiry." Cyprus has indicated it will juggle the two potential aid lines to secure itself the most favourable deal.

Meanwhile, providing an increasingly acknowledged backdrop to Cyprus' financial situation is the gas fields off its shores - a possibly major source of income.

The island has begun exploratory drilling and expects its first income from the large reserves by 2020.

Cyprus could 'combine' Russian and EU loans

Cypriot President Demetris Christofias is waiting to see whether the EU or Russia offers the best deal for his troubled banks - and has not ruled out taking loans from both.

News in Brief

  1. Putin offers Russian citizenship to Ukraine regions
  2. Romania adopts new rules weakening corruption fight
  3. Sturgeon pledges 2nd Scottish independence referendum
  4. Political deadlock looms at Sunday's Spanish election
  5. Le Pen in Copenhagen for talks with new key ally
  6. Trump to meet May and Macron on Europe visit in June
  7. Johnson's sister to run in EU elections on new list
  8. Weber pledges to 'block' Nord Stream 2 as president

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Details of EU Brexit talks with Blair and Soros kept secret
  2. Weber vows to block Nord Stream 2 amid 'sue' threat
  3. 'Next Juncker' must fix EU's corporate power problem
  4. EU want Facebook pan-EU advert fix for May elections
  5. Ukraine comic-president invited to EU capitals
  6. Trump's Israel plan to 'test' EU resolve
  7. Romania drafts EU code on NGO migrant rescues
  8. Bulgaria, Hungary, and Malta shamed on press unfreedom

Join EUobserver

Support quality EU news

Join us