The state is gradually reaching a point where it can afford to compensate, at least in part, people who lost money in the 2013 banking meltdown and the ensuing economic crisis, but should be careful to do so without causing fiscal or financial derailment, ruling DISY said on Tuesday.
Speaking to reporters after a meeting with representatives of former employees at now-defunct Laiki Bank, who demand that their provident fund money is paid back to them in full, DISY leader Averof Neophytou said that any decision should safeguard “social justice”, provided that the state can afford it.
Provident funds at Laiki and the Bank of Cyprus were ‘haircut’ by 47.5 per cent in March 2013, but the state pledged to pay back 22.5 per cent as soon as conditions allow, limiting provident fund losses to a total 25 per cent.
“Economic performance allows gradually, with prudence and sombreness, for the state to start restoring, bit by bit, and healing old financial wounds,” Neophytou said after the meeting.
“If we all continue responsibly, with a focus on maintaining economic stability, we can assure the Cypriot public that, in the medium-term, and in some cases in the long-term, this state will be able to mend the wounds of the financial crisis.”
Although the issue at hand in Tuesday’s meeting was the provident fund of Laiki’s former employees, Neophytou’s remarks touched on another sensitive subject – whether losses incurred on investments in a private business could, or should, be spread out among all taxpayers.
“It’s a compromise solution,” DISY spokesman Prodromos Prodromou said.
“On the one hand, whether the taxpayer should be asked to chip in to compensate specific groups whose money was used to support a failing private business is a valid question. On the other, everyone, taxpayer or not, depositor or not, benefited from the fact that banks, and therefore the economy at large, was saved.”
Therefore, DISY’s argument goes, involving the taxpayer is not necessarily a red line for the party.
“In addition, we must remember that the options available at the time – socialising the losses or bailing-in depositors, shareholders, bondholders, etc – were not fully, properly and exhaustively explored,” Prodromou added.
In any case, DISY’s spokesman said, we are not yet at the point of proposing sources of the funds or assets to be used in compensating those who suffered losses, nor the extent to which such compensation can be offered.
“It’s entirely possible that the state will only be able to offer a fraction of what these people lost as compensation,” he noted.
“We are not saying they can be fully compensated, nor that the state should be the only stakeholders involved in such compensation.”
On Monday, DISY’s leader met the Bank of Cyprus’ old shareholders – a group led by Archbishop Chrysostomos ¬ comprising people whose holdings in Bank of Cyprus shares were wiped out in the 2013 recapitalisation exercise.
The meeting kicked off a round of consultations with representatives of groups affected by the haircut, which will include sessions with the Laiki depositors’ association and the bondholders’ association in the coming days.