By George Koumoullis
A THOROUGH and documented study of the collapse of the Cyprus economy would be incomplete without the contribution of a social psychologist. This is imperative because of the inferiority complex Cypriots have towards mainland Greeks, a complex that is a major reason for the contraction of our economy.
If a Greek Cypriot does not fully identify with the economic policy, or any other policy for that matter, pursued by Greece he gets lambasted for his faux pas, as happened recently to Finance Minister Harris Georgiades.
Arguably, the most telling example of this complex is the Eurovision song contest. Greece’s entry could be a tuneless dirge performed by a singer that cannot sing but it would still receive top points from Cyprus. The paradox is that such servility is more likely to provoke contempt rather than appreciation and respect.
At the altar of so-called support for Greece, justice, objectivity, equal treatment and self-respect are sacrificed. We should not forget that Cypriot society includes a big number of patented ‘patriots’ that represent and promote the most conservative, undemocratic and reactionary positions, reinforcing, albeit unintentionally, this inferiority complex towards mainland Greeks.
What was it that made our bankers invest billions of euros in Greek government bonds in 2010, a period in which there had been repeated downgrades of Greece’s creditworthiness by Fitch, Moody’s and Standard and Poor’s, and all economic analysts considered the haircut of the Greek debt a foregone conclusion?
The conventional explanation for their catastrophic decisions was greed. Driven by the prospect of boosting their bonus payments, they gambled the products of the hard graft and toil of tens of thousands of depositors and lost. But if their aim was to maximise their own gains they could have bought from the secondary market government bonds of, for example, Ireland, Spain or Mexico. These carried much lower risk but also big prospects of significant capital gains. But they did not do this.
Their psychological inferiority complex towards the Greeks made them turn to the Greek bonds. Intoxicated by the cheers of the great patriots and the media, the intellectual level of our bankers fell below zero. Unfortunately, the expected super-profits turned into losses that the Cypriot people could not carry.
As a result of the Greek haircut, Cyprus lost €4.5 billion while the ‘mother country’ gained €106 billion (in the reduction of its debt). We were told months/years later that then president Demetris Christofias was stridently opposed to this decision as the loss for Cyprus was equivalent to 25 per cent of its GDP.
This is no consolation, because when he ought to have raised his voice, he improvised by exhibiting silence as a means of expressing his disapproval. He did not want to be regarded an ‘anti-Hellene’, he told us. But the caretaker prime minister of Greece Lucas Papadimos also kept quiet.
Many Cypriots believed at the time that Greece would behave like a “loving and caring mother” and would spare us our losses because she had been able to write off a significant part of its debts. They were bitterly disappointed. In addition to this, no Cypriot politician dared criticise the Greek government for the indifference it showed. The inferiority complex in all its glory.
When in March 2013 the Eurogroup decided to scalp the deposits in Cypriot banks, the then prime minister of Greece Antonis Samaras, did not oppose this harsh measure. On the contrary, he supported it and ensured that the possible spread of the systemic risk to the Greek financial sector was isolated. And as we all know, the Bank of Piraeus bought the Greek operations of the Cypriot banks with an immediate profit (and equivalent loss for the Cypriot banks) in the region of €3.5 billion.
DIKO leader Nicolas Papadopoulos refers to this transfer of assets as “theft” and blames ECB chief Mario Draghi (as we all witnessed during the latter’s recent visit to Cyprus). Papadopoulos’ inferiority complex towards the Greeks clouds his mind and instead of attacking the real culprit – Samaras – he reserved his ire for a non-Greek.
The huge hole that was opened when the Laiki ship crashed into the reef and eventually sank had nothing to do with official Greece but with a handful of well-known Greeks. And this raises another big issue: why was HSBC’s application to take control of 50-plus per cent of Laiki in 2005 rejected? If it had been approved and allowed to go ahead economic Armageddon would have been averted.
The then governor of the Central Bank Christodoulos Christodoulou had stated that the buy-out negotiations collapsed over differences on the purchase price of the shares. Unfortunately, Christodoulou is not a reliable source since his mindset ran counter to the principles of the Central Bank he was serving. Christodoulou’s explanation is not convincing at all, especially as subsequently, Andreas Vgenopoulos bought almost the entire HSBC shareholding in Laiki. The conviction that these two occurrences were related is widespread among the Cypriot public and is also a subject of political debate.
I do not think bankers of other countries (apart from Greece’s) of dubious standing and reputation could have displaced, with unrivalled intrigue, a banking giant like HSBC and taken control of a systemic bank. On this point, we should all take our hats off to the Greek bankers. Compared to the Cypriots, the Greek bankers are go-getters par excellence. They are all upbeat in stark contrast to the Cypriot bankers who are on the whole solemn and of few words.
There is therefore no surprise that their gift of the gab, in combination with their intriguing promises, dazzles their Cypriot counterparts and instils an inferiority complex.
In the past I would take offence when Greeks referred to us as ‘hazokoumbari’ (dimwits), but the collapse of Laiki more than justifies this description. And to use football lingo, bearing in mind the three blows I described above, the Greeks crushed the hazokoumbari on the banking football pitch by a whopping 3-0.
George Koumoullis is an economist and social scientist