Tuesday, April 2, 2013 CYPRUS MAIL
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An April Fool focus on AKEL’s ‘sins’ By Poly Pantelides THIS YEAR’S April Fool’s Day stories in the press yesterday focused on an imaginary row among AKEL top brass, impossible deals to save the economy and Omonia football club. Daily Politis said that a row erupted during an AKEL meeting last Friday when the party’s members starting looking back at the scandals of the previous AKEL government to explain why the glass of a framed picture of former President Demetris Christofias had been smashed. Christofias, whose term as president ended in February, was
shocked to come to a meeting to see his portrait, “smashed, as if someone punched it, breaking the glass”. But when the AKEL leadership started looking back at his government to “identify the negative series of events that led the Cyprus people to reject the (AKEL) philosophy,” Christofias became enraged, Politis said. Christofias then said that it was the Mari naval base tragedy that was the beginning of the end for AKEL. The blast - from nearly 100 containers with munitions left exposed to the elements for years- killed 13 people, knocked out the country’s main power station and contrib-
uted to slowing down an already struggling economy, handed down in shambles to the current government But in the imaginary meeting AKEL MP Nicos Katsourides blamed the 2010 scandal involving deputy attorney-general Akis Papasavas who charged the state €17,000 for tooth implants. “It’s not enough that Papasavas was never punished, the case’s files supposedly went missing from the hospital. People were disappointed at the way the whole thing got handled,” Katsourides said in Politis’ imaginary scenario. And to make matters worse, Katsourides said there were many other issues worth mentioning, such
as the scandal involving Andreas Moleskis who was initially given charge of the EU secretariat but was forced to resign after Politis revealed last year that his daughter’s boyfriend had been given an EU presidency job on a hefty salary. Christofias then lost it, and smashed his mobile phone on the table. “Nicos, ever since I set up Andros (Kyprianou) as secretary (general) in the party you’ve had it in for me,” he said. Kyprianou tried to contain the situation: “Calm down, Demetris, calm down comrade”. To calm down, Christofias took a few days off to visit Cuba and relax, Politis said. Simerini decided to focus on the
current government and their gargantuan task of supporting the economy. “Anastasiades rushes to Beijing today,” Simerini said conjuring up a Cypriot effort to get a €20 billion loan from China (larger than the country’s GDP). Haravghi talked instead of an amazing ancient palace discovery in Limassol but also poked fun at the left-wing football club, the cashstrapped Omonia, which is indebted to the tune of €17 million. A “strategic buyer-investor” was conjured up to buy a piece of land previously earmarked for the club’s football stadium. With the super-secret deal, Omonia will pay back its debt and will have fat yearly budgets for the next five years, Haravghi said.
A pop quiz on bailout: looking at the figures The so-called troika bailout is anything but By Antonis Polemitis MOST publications talk about the €10 billion or €17 billion Cyprus bailout. Let’s take a pop quiz on the right answer. (a) €17 billion euros (89 per cent of GDP) (b) €10 billion euros (52 per cent of GDP) (c) €2.5 billion euros (13 per cent of GDP) (d) €-3.0 billion euros (-15 per cent of GDP) (e) €-7.5 billion euros (-39 per cent of GDP) Now let’s work through the answers, in steps: (a) The €17 billion figure was calculated assuming the bailout would provide €7 billion for the banks. The final number provided not a single euro for the banks who were asked, against the approach taken in the last 147 banking crises worldwide tracked by the IMF, to find the whole €7 billion out of their depositor base. So, part (a) is wrong (b) The remaining €10 billion is described as a bailout of the government. Of this €10 billion however, €7.5 billion is being used to refinance maturing debt. This debt, I would guess, is mostly at this point beneficially held by the European Central Bank (ECB). This is just an assumption, but we know that 75 per cent of it was held domestically, largely by the banks. This was probably the first collateral pledged by the banks via the Emergency Liquidity Assistance (ELA), so ultimately if the Central Bank and the government default it will ultimately fall on the ECB’s balance sheet. The 25 per cent is probably traded internationally and again outside of Cyprus hands. So, the €7.5 billion is being lent to Cyprus in order to be paid right back to Europe. That is not charity, that is ‘hiding their embarrassing losses until later when someone else is in office’. If moral hazard requires clueless Cypriot retail depositors to pay for their banks’ decision to lend
Bank of Cyprus in Athens: Greek branches of Cyprus banks with €15 billion of deposits have been sold to the insolvent Greek government, then presumably it also applies to the financial wizards at ECB that lent to the insolvent Laiki, despite having full access to their financial information. That leaves €2.5 billion of fresh financing for the government which I will concede is new money, though until we see the Memorandum and the terms under which we receive this money, I am not too excited about it. Cyprus could raise this amount domestically so long as it did not have to do it overnight (which it does not - it is to fund deficits over the next few years). (c) Does that mean that €2.5 billion is the right answer? Not really, see below. (d) At least €5.5 billion of the ELA taken by the banks (I suspect it is more) was for losses in the Greek branches of the Cyprus banks. These branches have €15 billion of deposits that presumably could have also been haircut, along with the Cyprus-based deposits, to make up for the losses. Yet, under tremendous time pressure, they were sold to a Greek bank (very
suspicious), while the liabilities (the ELA) stayed in Cyprus and are now, beyond all logic, being transferred to the Bank of Cyprus. We can call this: “Cyprus Contribution To Recapitalisation of Greece, Part II”. And since Greece is insolvent and illiquid without EU assistance, it is really assistance to the EU. Given that, it is perfectly fair to subtract it from the EU’s assistance back to Cyprus. That takes us to €-3 billion. (e) The Greek PSI (write off of Greek government debt, implemented by the EU) impacted Cyprus, as Greece’s neighbour, in a wildly disproportionate manner. Cyprus banks took €4.5 billion in losses there. One could have imagined a solution at the time that partially compensated Cyprus for these losses. In any case, it was a contribution by Cyprus in reducing Greek public debt and given Greece is backstopped by the EU, it reduces the EU debt load, so that is how we get to €-7.5 billion. Cyprus has certainly contributed
to Greece’s bailout on a per-capita basis at a level vastly exceeding any of the nations that are putatively suffering from “bailout fatigue”. Cyprus, voluntarily or not, has contributed around five per cent to Greek public and private debt reduction, despite being 0.2 per cent of the European economy, so a rate of 25x the European average, plus or minus. The apparent “thank you” from the EU, is to try to talk down the main basis of the Cyprus economy (financial services) and aim to destroy the rest of the otherwise fairly healthy Cyprus economy by sucking all liquidity out of the system, literally overnight. I would grade (d) or (e) as correct answers. But I don’t see any version of the numbers where Cyprus is not a net creditor to the EU bailout regime, as opposed to a net beneficiary. Antonis Polemitis is a venture capitalist based in Manhattan, New York. This article first appeared on the Naked Capitalism website www. nakedcapitalism.com
Court renews remand for hospitalised murder suspect LIMASSOL district court renewed an eight-day remand yesterday for a 34year-old man suspected of killing a man and injuring four others in two separate shooting incidents in Kofinou on March 23. Police are guarding the suspect in Limassol hospital after he crashed his car after the shootings on the Aradippou-Avdellerou road where he was arrested. Cyprus News Agency said yesterday the man’s doctors expected him to stay in hospital for about three months. The 34-year-old is suspected of attacking and killing Panayiotis Stavrou, 54, and injuring his 27-year-old son, Giorgos, at a Turkish Cypriot house in Kofinou which the father and son were working on in the morning of the attack. The shootings - with a Kalashnikov assault rifle - were reportedly over a dispute over the property that the 34-year-old had been lobbying the guardian of Turkish Cypriot properties to hand over to him but was given to Giorgos instead. Turkish Cypriot properties in government-controlled areas fall under the jurisdiction of this organisation that is part of the interior ministry. After the first shootings, the 34-year-old then allegedly went over to a supermarket belonging to family who were given a piece of government land that he was also reportedly claiming. There, he shot two of the owners, two brothers aged 47 and 36, as well as at a 36-year-old woman who was shopping at the time. Another one of the owners, a 56-year-old man, managed to get the gun off of him and the 34-year-old allegedly left in a car. The three people who were injured at the supermarket are being treated in hospital but are doing better, Larnaca News Agency said. The 36-year-old mother of two, Katy Charalambous, who had been in need of the rare blood type O negative, had an operation on her leg a few days ago, the news agency said.