By Stefanos Evripidou
THE STATE will become the “exclusive owner” of the co-operative movement under an agreement reached with the troika on how to bailout the co-ops, it transpired on Wednesday.
IMF mission chief Delia Velculescu on Wednesday confirmed that the movement will be recapitalised without a depositor ‘bail-in’, though how it will receive and pay back the roughly €1.5 billion needed was not made clear.
Speaking before her departure from Cyprus following the troika’s two-week review of the country’s bailout adjustment programme, Velculescu said the Cypriot authorities have developed a plan to recapitalise the rest of the banking sector, and in particular, recapitalise and restructure the cooperative credit sector before the end of the year.
“This will be done with programme resources if needed, and without depositor involvement,” she added.
According to a troika statement, banking sector regulation and supervision is also being strengthened, including the integration of the supervision of the cooperative credit sector into the Central Bank of Cyprus (CBC).
In recent days, there has been much comment on how the co-op movement will pay for the estimated €1.5 billion needed to recapitalise.
While agreement was reached with the troika on the downsizing of the number of co-ops from 93 to 18, the method of refinancing the movement became the issue of much speculation.
According to reports, the EU’s Competition Commissioner objected to the government lending the co-ops €1.5 billion from its €10 billion bailout on low interest, citing state aid rules which suggest the loan should be made with interest set at 10 per cent. This would effectively require the beleaguered co-ops to come up with €150m a year in interest.
Commenting on the issue, Finance Minister Harris Georgiades said on Wednesday the government has managed to ensure that the co-operative movement will be supported and recapitalised without the need for a haircut. This will be done using public money, obtained from the international bailout.
“Recognising the massive importance and contribution of the cooperative movement, we have secured its recapitalisation with public money. This is not about a loan with high interest, but state participation in share capital, essentially, as an exclusive owner at 99 per cent,” he said.
He added that as the exclusive owner, the state will benefit from any profits made through and be burdened with any losses incurred.
“There is no guaranteed return, let me be clear, but the state as exclusive owner, will enjoy possible profit or suffer possible loss,” said Georgiades, stressing that the co-op movement would not be burdened with any demand for guaranteed returns.
However, state broadcaster CyBC last night reported that the issue has not yet been cleared up, with general manager of the Central Co-operative Bank Erotocritos Chlorakiotis due to make a statement on the matter this morning.