Tuesday

26th Sep 2017

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).

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

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.

EU takes time to ponder tech giant tax

The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel