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Cyprus

Christofias to blame for economy, says panel report – leak

The report of an inquiry investigating the events leading to the country’s near-financial ruin reportedly blames former President Demetris Christofias for the sorry state the economy.

Online news portal Sigmalive said on Thursday it had seen the whole of a lengthy report spanning hundreds of pages.

One published excerpt says: “Bearing in mind the body of testimony that was put to us, the first and foremost person responsible for bringing our country’s economy to the brink of bankruptcy is the former President of the Republic, [Demetris] Christofias.”

Most of the events the committee of inquiry investigated took place under Christofias’ watch, particularly the period between March 2008 and February 2013, when the former president left office.

His administration reluctantly asked for an international bailout in June last year, after the island’s major banks asked for a state bailout. The government was unable to support the lenders following years of steady deterioration of its finances from 2008 onwards.

Between 2008 and 2012, public debt as a proportion of GDP rose from 48.9 per cent in 2008 to 85.8 per cent in 2012, while the deficit came to 6.3 per cent in 2012, from a surplus of 0.9 per cent in 2008.

When a new government finally negotiated a bailout this March, it was forced to shut down the island’s second biggest lender, Laiki, and place the biggest, the Bank of Cyprus, under administration. The Bank of Cyprus’ depositors have also had to accept a 47.5 per cent haircut on their uninsured deposits in return for equity in order to recapitalise the lender.

The report appears to hold Christofias accountable for defining the state’s fiscal policy in a way that ignored the consequences over a range of economic indicators, holding him responsible for ignoring technocrats and experts recommending more balanced budgets in favour of increasing expenses. “He insisted on imposing his views, ignoring advice and promptings from experts in matters of the economy as to the consequences of his actions.”

“[Christofias] had no moderation,” the report said. Christofias himself walked out of the panel inquiry, refusing to answer questions.

The report also blamed Christofias for allowing a 2011 eurozone decision to write down Greek sovereign debt without argument, despite the catastrophic consequences for the island’s major lenders which had invested heavily in Greek bonds.

The report also appears to hold the members of the former president’s cabinet accountable for failing to take a stand, and political parties for supporting Christofias’ policies, especially Christofias’ own party AKEL, but also coalition parties DIKO and EDEK that eventually left the government for their own reasons. Current President Nicos Anastasiades and his government are responsible for failing to adequately prepare for the March bailout negotiations, the report said, according to Sigmalive.

 

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