Disy chairman Averof Neofytou said that his party is planning to submit a proposal to set up a fund to compensate depositors and investors who lost money in the 2013 banking crisis.
Neofytou, who was commenting on state radio CyBC on Monday, hours before a scheduled meeting of the finance committee of the parliament, said that the fund would provide compensation to depositors, bondholders and shareholders who are contributing to the social insurance fund.
While the constitution does not allow the parliament to allocate funds, it can set up the legislative framework so that the executive branch can provide funds required to compensate groups when economic growth and budget surpluses allow this to happen, he said. He also rejected that the proposal is serving political expediencies ahead of next year’s presidential elections.
While total losses of investors and depositors in the crisis amount at €9.5bn, the fund would distribute up to €0.5bn, he said.
“All people contributed to fiscal consolidation,” Neofytou who also chairs the House finance committee said. “For the consolidation of banks, only a portion of our people paid a heavy price”.
He added that the ones burdened the most were those who had bonds issued by Cyprus Popular Bank, widely known as Laiki, or its depositors who lost all their uninsured deposits, followed by depositors and bondholders at Bank of Cyprus “and the shareholders,” he said.
The intention to set up this type of compensation fund was met with mixed reaction. The proposal was included in Monday’s agenda of the finance committee.
The chairman of the Citizens’ Alliance and presidential candidate Yiorgos Lillikas who jointly submitted the proposal to the parliament, said that the establishment of the compensation fund will lift “this social injustice”.
On the other hand, Alexandros Apostolides, who teaches economics at the Nicosia-based European University of Cyprus, threatened that he would resort to the courts should the parliament pass such a law.
“By legislating this way, the parliament would interfere in pending court cases while the resolution of Laiki is not completed yet,” he said in a telephone interview on Monday. He also added that this entailed a moral hazard as it would encourage risky investment and it would create a precedent for the taxpayer having to foot the bill for the losses of private investors.
Neofytou said that a solidarity fund set up months after the banking crisis attracted only one contributor who happened to be a Cypriot pensioner who emigrated to Canada.