By George Psyllides
FORMER president Demetris Christofias and his finance minister appeared to have different views over the state of the economy in relation with the write-down of Greek debt in October 2011, an inquiry heard yesterday.
The investigating committee looking into the causes of the island’s economic debacle, yesterday examined the minutes of an October 25, 2011 – a day before the EU leaders, including Cyprus, agreed to write-down Greek debt – cabinet meeting that discussed, among other things, the potential effects of the write-down to Cyprus.
The cabinet had touched upon the possibility of seeking EU assistance.
Reading from the minutes, the chairman of the committee Giorgos Pikis, quoted Christofias as saying: “In any case, we are not alone; we are in the least worst situation. There are others that are worse off.”
Kazamias however disagreed, telling the president that “we are in the worst position proportionately, based on our size and our banks’ involvement in the Greek market and bonds.”
Asked if he thought Cyprus’ situation was tragic in relation with the write-down, Kazamias said “it was difficult.”
The write-down resulted in the two biggest banks – Laiki and Bank of Cyprus (BoC) – incurring losses of over €4.0 billion.
Laiki has since been wound down and BoC is struggling to get out of administration after the Eurogroup decided to impose heavy losses on its depositors to recapitalise the stricken lender.
Kazamias, who testified before the committee for the third time, revealed that on November 22, 2011, Laiki CEO Efthimios Bouloutas sent him a letter informing him that the lender would need around €1.5 billion to recapitalise.
Bouloutas bypassed the Central Bank (CBC), Kazamias said, and without making any reference to the lender’s condition after the write-down, “effectively suggested to the finance minister that they preferred that the state strengthened their capital base.”
Kazamias responded on December 5, telling Bouloutas that a due diligence must be carried out by an independent firm, stressing that any decision to support the bank would be on the basis of a recommendation by the CBC.
Kazamias said no such due diligence had been carried out by the time he left the ministry in March 2012.
The former minister also submitted a January 17, 2012 memo drafted by ministry technocrats saying Greece’s bankruptcy and potential exit from the eurozone would be much worse for Cyprus than a write-down of debt.
It is understood however, that at the time, the final percentage of the write-down was not known.
It eventually reached 80 per cent.
At the end of the hearing, a visibly irate Kazamias, complained to the committee, that its bailiff had been waiting on his doorstep at the crack of dawn to hand him the summons.
“This thing bothers me,” he said, adding that a phone call would suffice. “It is as if we are difficult to find,” the former minister said, implying that this was treatment befitting criminals.