Saturday

6th Jun 2020

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 20 years of archives. 14-day free trial.

... or subscribe 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.

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

News in Brief

  1. Poland accused of 'blatant violation' of EU court injunction
  2. EU concerned by US approach to Kosovo and Serbia
  3. City morgues cast doubt on Putin's virus data
  4. ECB increases pandemic stimulus to €1.35 trillion
  5. New EU cloud computing platform 'moonshot'
  6. City of Berlin passes anti-discrimination law
  7. Iran hits record corona cases in second wave
  8. EU job losses tell tale of pandemic damage

Stakeholders' Highlights

  1. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  2. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  3. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  4. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  5. UNESDACircularity works, let’s all give it a chance
  6. Nordic Council of MinistersNordic ministers call for post-corona synergies between economic recovery and green transition

Latest News

  1. EU warns UK to abide by Brexit political declaration
  2. Internal EU borders open by 15 June - bar V4, Portugal, Spain
  3. CAP 'failed to halt biodiversity loss', auditors find
  4. After Covid-19, deserted Venice struggles to survive
  5. Commission plans strategy to 'maximise' vaccine access
  6. How spies use women to steal EU secrets
  7. Hong Kong - when the Chinese Dream became a nightmare
  8. Right of reply: Letter from the Hungarian government

Join EUobserver

Support quality EU news

Join us