PRESIDENT Anastasiades came to power at the most difficult time in Cyprus’ history since 1974. Two weeks after he took office he was in Brussels to discuss the bailout and was forced to accept a haircut of all bank deposits. But the legislature refused to approve this and 10 days later the Eurogroup and the troika imposed much tougher MoU. Laiki Bank was under resolution, and the Bank of Cyprus not only had to bail in its uninsured depositors and freeze bank accounts, it was also lumbered with the former’s €9.5bn ELA debt.
Less than a month in power and he was presiding over a rapidly shrinking economy, a collapsing banking sector that had to be protected with capital controls and plummeting living standards. None of this was of his doing, but the legacy of five years of Christofias’ gross incompetence, procrastination and rampant populism, combined with the deteriorating position of the banks that had taken a big hit from the Greek PSI. Still, we had hoped that the new president would be different, that he would have the mettle and nerve to provide the strong leadership that the country so desperately needed.
Sadly this strong leadership we had hoped for has not been evident in the first 100 days of Anastasiades’ presidency. On the contrary, we have watched him pander to union bosses, try to win over the hard-line nationalists, commit errors of judgment on basic issues and make promises that he would have great difficulty keeping. The pragmatism he had shown before he was elected is no longer evident and he seems overly concerned with his popularity, as if he was already thinking about his re-election.
Perhaps he has not yet recovered from the trauma of the March Eurogroup meetings which apart from destroying his credibility (he had pledged he would never agree to a haircut of deposits) multiplied the problems facing the economy. Then again, this is the situation we are in, and the president needs to take difficult decisions with the longer term in mind and no concern for the political cost.
Instead he has been pandering to the union bosses, making all sorts of promises he cannot keep. His government’s promise of additional redundancy compensation for Cyprus Airways workers, at a total cost of €20m, was a case in point, with the company’s board declaring on Thursday it could not honour it. The previous board resigned because it could not honour the compensation deal between the government and the airline’s unions.
His worst blunder yet, was the letter he sent to the leaders of the troika, asking for changes to the terms of the memorandum so that a collapse of the banking sector could be averted. Although it was a very well-argued letter, it should never have been made public, because it caused panic among the public who rushed to the banks on Wednesday and Thursday to withdraw as much money as they could.
In its defence the government could argue that it did not leak the letter to the media, but the president’s decision to give it to the party leaders was as good as leaking it. Why did Garoyian, Omirou, Kyprianou and Perdikis have to be given the letter? Anastasiades is not accountable to them nor does he have any obligation to keep them informed about what he was doing. Does he feel so isolated that he craves the public approval of AKEL and EDEK?
The letter should have remained a carefully guarded secret, because there is the possibility that the troika would turn down his request. In such a case, if there was an outside chance of still saving the banking system, it has been shattered by the president’s letter, which spoke about the ‘systemic importance’ of the Bank of Cyprus both for the banking system and the economy, stressing the need for its survival. From this it is very easy to conclude that if the MoU terms were not changed the systemic bank would crash taking everything with it.
People are certain to carry on withdrawing as much money as they are permitted from the banks – co-op bosses were complaining about increased withdrawals on Friday and trying to reassure the public the was no danger – thus putting them in even bigger capital difficulties. The tragedy is that the situation does not look like it can be fixed. We can only hope and pray that the troika will soften its stance and try to help, because the mindless leak of the president’s letter destroyed the very slim hopes of the banking sector regaining any confidence.