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If the banks go it all goes ‘Cyprus as financial centre would cease to exist without them’ By George Psyllides
F
ORMER president George Vassiliou has appealed for an end to the “war” against Cyprus’ banks, warning that loss of confidence in the sector would be catastrophic for the island. In an interview with the Sunday Mail, Vassiliou, who was also Cyprus’ chief negotiator during the EU accession talks, agreed that banks had made mistakes as regards the size of their Greek bond holdings - which led to their current troubles - but stressed that Cyprus as an international financial centre could cease to exist without them. “The war against the banking sector is a war against Cyprus,” he said. “To attack the banking sector as a whole works against the interests of Cyprus.” The island’s two main banks, Bank of Cyprus (BoC) - the biggest - and Popular Bank, suffered record 2011 losses as a result of a write-down in their portfolios of Greek sovereign debt, an impairment agreed by European leaders, including Cyprus’ president, to make Greece’s debt more
sustainable. The decision proved costly for the island, with the Popular Bank needing at least €1.8 billion from the state, while BoC has asked for €500 million. Imposing the haircut on holders of Greek sovereign debt essentially pushed Cyprus - already shut out of international capital markets for a year and in recession to seek international aid. At the same time, the government and opposition have been engaged in fierce public debate over who is to blame. The government claims it’s the banks while opposition parties said it’s the administration’s mismanagement of the economy. “No one can say the government was infallible nor can one say the banks were infallible; but this is not the essence of the problem at the moment,” Vassiliou said. Vassiliou says the main reason for Cyprus’ travails is the “Greek tragedy” which naturally affects Cyprus because of the links between the two countries’ economies. The former president said the two lenders could have avoided buying such a large
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Representatives of foreign countries look on at the Place de la Concorde during the traditional Bastille Day military parade in Paris yesterday (AFP)