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14th Apr 2024

Cyprus demands revision of 'unjust' EU bailout

  • Anastasiades, who personally agreed the 'unjust' deal, speaking to media in Brussels (Photo: consilium.europa.eu)

Cypriot President Nicos Anastasiades has demanded a complete revision of his country's €10 billion bailout, which imposed unprecedented cuts on large depositors. But it is unlikely his request will be approved by eurozone ministers.

In a leaked letter sent last week to eurozone leaders, Anastasiades said his country was treated unjustly for fear its problems may spread to the barely-stable Greece, the Financial Times and AFP report.

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"Artificial measures such as capital restrictions may seem to prevent a bank run in the short term but will only aggravate the depositors the longer they persist," he wrote.

"Rather than creating confidence in the banking system they are eroding it by the day," he added.

He also criticised the way the two largest banks - Bank of Cyprus and Laiki - were forced to impose losses on their largest depositors.

"No distinction was made between long-term deposits earning high returns and money flowing through current accounts, such as firms' working capital," he said.

"This amounted to a significant loss of working capital for businesses," he noted.

With recession deepening to a projected 12.5 percent in the next two years and with unemployment on the rise, Anastasiades asked fellow EU leaders to "review the possibilities in order to determine a viable prospect for Cyprus and its people."

The centre-right president, only four months in the job, himself agreed to the terms of the bailout after weeks of negotiations which at one point would have imposed losses on all depositors, big and small. Under EU rules, deposits below €100,000 should be protected.

His letter is likely to be discussed on Thursday at a meeting of eurozone finance ministers, but chances are slim that any changes are made to his country's bailout, as any extra money or more time to repay it would be dismissed by Germany ahead of general elections in September.

Meanwhile, the Cypriot government has announced it will sell casino licences and build a natural gas storage facility in a bid to restart its troubled economy.

Its model was so far was based on no-questions-asked offshore banking and low tax, attracting money from places like Russia and Ukraine.

As part of the bailout deal, Cyprus has put part of its gold reserves on sale and boosted its corporate tax to 12.5 percent.

It is also closing down Laiki and deeply restructuring the Bank of Cyprus, the country's largest lender.

Meanwhile, capital controls, put in place in March to prevent a massive flight of money from the island, are still partly in place and continue to cause difficulties for Cypriot businesses.

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