HAVING run out of negative things to say about the Anatasiades presidency’s policies, the Nicolas Papadopoulos camp decided to use the March 2013 bail-in to score electoral points. His communications advisors must think there are votes to be won from this negative campaigning. But it is resoundingly futile as what happened, happened and nothing Papadopoulos says now will change it. President Anastasiades’ handling of the crisis could have been better, but the opposition parties did not exactly propose any viable alternatives at the time.
Anastasiades came back from the first Eurogroup meeting with a proposal for an across-the-board levy on all bank deposits, which all the opposition parties rejected when it was put to the vote at the House plenum. If Anastasiades made one mistake, it was that he did not show strong leadership in backing the proposal and forcefully arguing for its approval as the best possible solution. In fact, the impression he gave was he wanted the parties to reject it, which may explain why his own party, Disy, abstained when it was put to the vote. What party abstains from voting on an issue that would shape the future of the country?
Once it was rejected, the alternative proposed by the parties, including Papadopoulos’ Diko, was that the government should secure a loan from Russia to cover the financial needs of the state and the banks, even if the amount needed was well in excess of €10 billion. The idea that Moscow would provide that kind of money to a bankrupt state and its insolvent, systemic banks was beyond naïve, but our politicians talked about this as a realistic option. The Russian government soon dashed those hopes and this led to the winding down of Laiki and the second Eurogroup meeting which decided the bail-in of bank deposits on over 100,000 euros and shareholders was the best solution for Cyprus.
It was a harsh measure, in which Bank of Cyprus customers lost almost half their uninsured deposits, but in retrospect, it was the most sensible solution because it restricted the sovereign debt to a little over 100 per cent of GDP. Had the banks been bailed out as had happened in Greece, Cyprus would have been burdened with a massive sovereign debt that would have necessitated high taxation and tough austerity measures that would have kept the economy in recession for a very long time. Greece’s banks were bailed out and the country is now saddled with a crippling public debt and high taxation that will stifle economic recovery for many years.
Outgoing Eurogroup president Jeroen Dijsselboem, speaking at the European Parliament a few days ago was very clear about Cyprus’ choices in 2013. “The opposite approach (to the bail-in), if it had been a bail-out of the banks that fully protected all investors in banks, would have bankrupted Cyprus completely,” he said.
The reason Cyprus recovered so quickly and will this year record a growth rate close to 4 per cent is because there was bail-in in 2013 and although our wise politicians wanted otherwise we were not saddled with huge sovereign debt we would have been unable to service.