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Cyprus Internet Directory [ Our View: Christofias’ filibustering over bailout causing untold damage ]

Our View: Christofias’ filibustering over bailout causing untold damage

WHEN the government applied to the European support mechanism, in late June, many of us believed that President Christofias, having no funding options, would be forced to sanction the tough measures he had avoided taking in the last two years. How wrong we were to even entertain such an idea.

Two-and-a-half months later it is becoming apparent that he has no intention of taking the necessary unpopular measures - cutting pay and pensions, privatising state corporations, reducing benefits, scrapping CoLA, etc - and his only objective is to buy time, in the hope of seeing out his term without signing a bailout agreement.

This is why the government has done nothing to prepare people for an austerity package - there have not even been consultations with the social partners - engaging instead in Christofias’ favourite tactic of filibustering. Representatives of the troika completed their consultations in Cyprus before the end of July and delivered a document with its proposals to the government before departing, but the government has been dragging its feet ever since.

Finance Minister Vasos Shiarly claimed, earlier this week, that “consultations are at a advanced stage”, but insisted the government had “never promised to submit counter-proposals within August”. Troika representatives have been invited back to Cyprus in the second half of September - another indication of the total lack of urgency - but it is highly unlikely the government will be ready to finalise a bailout deal by then.

AKEL chief Andros Kyprianou’s gave a demonstration of the government’s filibustering intentions on Thursday, when he said the troika had submitted ideas - not proposals - that would be discussed before the Cypriot side tabled its counter-proposals. “It is very early for anyone to take a stance concerning what they will do when the troika submits any proposals,” he said, suggesting there was no rush while also hinting at the possibility of rejecting the bailout terms.

As for the government, it has been calculatingly avoiding the issue. It has had no discussions with the ‘social partners’, in preparation for austerity measures nor has the president deemed it necessary to discuss these with party leaders, in an effort to forge a united front. His spokesmen have instead been lambasting the DISY leader for his positions on the Cyprus problem and pillorying the former governor of the Central Bank for the banking crisis.

There is also the much-trumpeted issue of the Russian loan, which the government keeps slipping into public debate in a transparent attempt to divert attention away from its inaction. Nobody knows whether the €5 billion loan will be given (neither Shiarly nor any government official could confirm a press report claiming it had been secured), but even if it were, it would change nothing with regard to the bailout terms, as the government has been claiming.

The indecision and filibustering are causing great harm to the economy, by cultivating additional insecurity and uncertainty. Nobody knows what will happen. Will the government reject the troika’s bailout terms or will it persist with its delaying tactics in the hope of avoiding a decision until Christofias leaves office? Perhaps it will sign the bailout agreement and then refuse to implement its terms on the grounds that the ‘social partners’ were opposed to them. 

Prolonging the uncertainty is more damaging than any austerity package as it kills business initiative. Nobody will take an investment risk, as long as the possibility of rejecting a bailout exists, because this would lead to a collapse of the banks and the end of Cyprus as a financial services centre. Nobody in the government seems to understand that the immediate re-capitalisation of the banks is a dire necessity for the economy to have a future. Delaying it not only prolongs the economic uncertainty but also puts the survival of the banking system at great risk. 

These risks and the uncertainty they fuel will only be eliminated when the bailout agreement is signed. Austerity measures will be unpopular as living standards will fall and the economy contract. But at least public finances would be put on a sound basis and the banking sector would be able to support business activity again, as re-capitalisation would allow the banks to start lending money, presumably at lower interest rates. 

The path to economic recovery and growth, which all our politicians pay lip service to, passes through a bailout and austerity. But someone must first persuade the deluded and reckless populist Christofias that the heroic path of resistance to the troika he wants to follow will lead inexorably to destitution and despair.



(Source: Cyprus Mail)
Copyright © Cyprus Mail 2008 Please contact Cyprus Mail for the copyright terms of this article.

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