Cyprus Mail
Business Cyprus

MPs to further probe collapse of economy

By George Psyllides

The House Ethics Committee decided on Tuesday to start looking into individual aspects of its probe into the collapse of the economy, starting with the outflow of deposits and whether their owners had met their tax obligations.

Committee chairman, EDEK MP Nicos Nicolaides, said the 500-page report raised some important matters, “which to a large extent, were responsible for the bad course.”

Such matters were the rise of the emergency liquidity assistance (ELA) to over €9bln, the forced sale of Cypriot banks’ operations in Greece, and the outflow of deposits.

“The committee’s decision it to start an in-depth discussion of these issues because new information may have emerged and because they must be discussed at a legislative level,” Nicolaides said.

The MP said it was not their intention to intervene or interfere with any other procedures but to keep such matters open in a bid to help the administration of justice.

Discussion will begin on Tuesday with the outflow of deposits and their potential link to the tax obligations of the people who withdrew their money.

In its report, released in May last year, the committee said the management and the officials of the now defunct Laiki bank, acting in a methodical, systematic and criminal manner, led the lender, and, at the same time, the Cypriot economy to collapse.

The Committee concluded there had been a strategy of unloading debt onto Cyprus through Laiki’s Greek operations, forcing the bank to increase its exposure to Emergency Liquidity Assistance (ELA) and possibly transferring it to Greece to cover interbank lending there.

“This however, in the view of the committee, in combination with the loss of deposits, was the main reason for the continuous increase of ELA that brought about the dramatic effects and the collapse of the banking sector in Cyprus,” the report said.

By March 28, 2013, Laiki had borrowed €9.1bn in ELA, more than half the country’s GDP.

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