Cyprus Mail
Cyprus

INDEPTH: Stavrakis; I was just doing my job

By Poly Pantelides

THE COUNTRY went bankrupt because of its overextended banks, not because of any deterioration in state finances, a former minister with the previous government told an inquiry yesterday.

Charilaos Stavrakis said Cyprus’ €10 billion bailout – over half of the country’s yearly economic output – could not be attributed to a lack of timely measures to address the country’s deteriorating finances. He was testifying for the third time before a committee of inquiry looking into the country’s economic debacle.

Finance ministry technocrats previously told the inquiry austerity measures should have been taken much sooner. The budget department’s Stavros Michael even said that he and his peers had warned the government as early as 2008 that expenditure needed to be controlled because they anticipated a drop in revenues. Stavrakis said that no measures – “say in February 2010” – could have prevented a €10 billion bailout.

“We did not go bankrupt because of state finances,” Stavrakis said.

Stavrakis, who took over as minister in February 2008 and was replaced in August 2011 following a Cabinet reshuffle, said that the government’s deficit and debt was comparatively better than the eurozone’s. He inherited a surplus in 2008 of 3.5 per cent of the GDP that closed in 2011 on a 6.3 per cent deficit. Public debt also jumped from 48.9 per cent in 2008 to 71.1 per cent in 2011. However, Stavrakis said this was better than the eurozone average for most of his term. “The global financial crisis impacted the whole of the eurozone… so we need to see how we did in relation to the rest of the eurozone,” he said.

As before, Stavrakis blamed the banks’ exposure to Greek debt for Cyprus’ exclusion from borrowing in international markets in May 2011. He also criticised what he referred to as the “economic dependence” across multiple levels of banks’ board members, executives and consultants who would all take out loans with the same bank whose actions they might need to question.

Stavrakis also dismissed statistics showing that Cyprus marked one of the highest increases in deficit between 2008 and 2011, under his watch. “That is not how you measure a country’s performance,” Stavrakis said. “The deficit is the deficit of that year… In 2010, 5.3 per cent was better than the eurozone average (of 6.2 per cent).”

Stavrakis was also asked to explain why – as he said in his book published last year – he convinced a Fitch credit rating agency to delay announcing a devastating downgrade until after parliamentary elections in May 2011. “Your action concealed from the electoral body a significant event,” the inquiry’s panel told Stavrakis. “I don’t think that’s fair,” Stavrakis said, adding that he just tried to do his job “in the best way possible” and thought best under an “intense climate” to “lighten things”.

But he conceded that, just as he said in his book, he had announced an initial deal on an investment from Qatar just two days before elections. Though the deal, with its promises of millions in investment opposite the Hilton hotel in Nicosia, never went ahead, Stavrakis said in his book the announcement translated to “electoral profit for the ruling party”.

Attorney-general Petros Clerides is due to appear to the inquiry tomorrow morning to discuss among other things a move by Laiki’s administrator to secure from a Cypriot court interim court orders freezing €5.3 billion belonging to former Laiki bank strongman Andreas Vgenopoulos and two others.

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