By Stefanos Evripidou
THE CYPRIOT authorities are ready to cooperate with the troika to see how to tackle some of the “difficulties” that have arisen during implementation of the terms of the Cyprus bailout, without wishing to change those terms, clarified Finance Minister Harris Georgiades yesterday.
Speaking after a Eurogroup meeting in Luxembourg, Georgiades told state broadcaster CyBC that he reiterated to his eurozone counterparts Cyprus’ commitment to implementing the memorandum of understanding with the troika in full, noting that Cyprus will be subject to its first progress report by the troika.
At the same time, he highlighted to eurozone finance ministers that some issues were causing problems in completing the MoU programme, like the capital controls imposed and delays in restructuring the island’s biggest lender, the Bank of Cyprus (BoC).
Ahead of Thursday’s Eurogroup meeting, a number of foreign press reported that Cyprus wanted to change the terms of its bailout agreement, inviting the ire of several unnamed EU officials.
The reports were based on a letter sent by President Nicos Anastasiades to the heads of the troika (IMF, European Central Bank and European Commission) effectively calling for help to deal with the liquidity strain on the BoC.
He argued that the badly-planned ‘bail-in’ of BoC and the now defunct Laiki ended up dumping €9 billion worth of Laiki’s emergency liquidity assistance (ELA) on to the BoC, in turn, creating a serious liquidity problem for the systemic bank.
If the BoC loses access to cash, this will have grave consequences, not only on the banking system, but on the economy and the successful implementation of the MoU, argued Anastasiades.
Instead of maintaining capital controls and further undermining confidence in the Cypriot banking system, the troika needs to help Cyprus come up with ways to secure the BoC’s viability, preferably by getting the practical backing of the ECB.
Georgiades yesterday argued that press reports claiming Cyprus was seeking changes to the MoU, barely after having signed on the dotted line, created the wrong image and undermined Cyprus’ efforts.
“There is no such issue. Cyprus is not seeking renegotiation of the MoU, but there are some issues that are causing problems in its implementation, and tackling them requires the cooperation of the troika. That is what I asked for at the Eurogroup and that is what we agreed,” he said.
The minister said the Cypriot authorities, including the central bank, will cooperate with the troika to examine ways of tackling the difficulties raised.
Speaking after the Eurogroup meeting, its President, Dutch Finance Minister Jeroen Dijsselbloem said: “We are unanimous that a determined implementation of the (bailout) programme is indispensable. We agreed that the BoC needs to be brought out of resolution as quickly as possible and the best way to achieve this is through the implementation of the financial strategy on the restructuring of the financial sector that was agreed between Cyprus and the programme in the MoU.”
He added: “Swift and determined progress on the part of the Cypriot authorities with the implementation of the financial sector strategy as agreed in the MoU is key to bringing the bank of Cyprus out of resolution and eventually lifting capital controls at a pace that is optimal for the economy.”
According to sources, at the Luxembourg meeting, the Cypriot finance minister confirmed his government’s commitment to fully implementing the MoU but at the same time raised the issue of certain side-effects and practical problems emanating from the process.
The source said these problems were registered by the eurozone partners and will be further discussed to find solutions.
The purpose of Anastasiades’ letter was to raise the alarm at an EU level and that was achieved. The matter has been put on the agenda and is already being dealt with, added the source.
Whether the solutions eventually proffered will achieve the intended result remains to be seen.
At the same time, Cyprus’ EU partners reiterated that the resolution process of the BoC must be completed as soon as possible; a message the government has oft repeated to the responsible authority, the Central Bank of Cyprus.