Cyprus has branded itself as a victim of Greek debt restructuring and said it anticipated solidarity from its EU partners as it struggles to clinch an international bailout.
Last June, the island became the fourth eurozone state to apply for a financial rescue from the European Union and the International Monetary Fund after its banks suffered huge losses on the EU-approved write-down on Greece’s debt.
Aid talks for Cyprus have been complicated by concerns over debt sustainability because of the size of the potential bailout bill. It could reach 17 billion euros, virtually equivalent to the island’s national output.
“We never asked for special treatment,” said Stefanos Stefanou, the Cypriot government’s spokesman.
“What we are asking for is an expression of solidarity – which is a basic EU principle – towards a country which is the victim of a European decision to restructure Greek debt.”
The island’s outgoing government, facing a national election on February 17, is resisting lenders’ demands to privatize state assets. It is trying to mitigate assessments of the needs of the banking sector to make the eventual debt load manageable.
In October 2011, EU leaders agreed to impose a valuation discount – or haircut – on Greek sovereign debt holdings. That decision, which was supported by Cyprus’s president, saw the island’s banks book losses equivalent to about 20 per cent of its entire economic output. The island, shut out of financial markets for the past 18 months, has been forced to rely on short-term high-yield loans from domestic institutions to meet monthly payments.
Recently it borrowed from the state-controlled electricity authority and its telecoms company. Under a draft accord with lenders, these assets could potentially be privatized to ensure Cyprus will be able to pay back any financial aid.
Cyprus says these are strategic assets necessary for national security
Meanwhile, the front-runner in next month’s Cypriot presidential elections promised to back the terms of a bailout deal with international lenders, but said privatisations would not be a priority for his administration.
“I fully acknowledge the need for the new government to implement the terms of the Memorandum of Understanding, fully and effectively… [and] the importance of meeting all targets and objectives,” Nikos Anastasiadis, head of the right-wing Democratic Rally party, told Reuters in an interview.
If elected, he said, he would introduce reforms to foster sustainable development and growth, including new business incentives and civil service restructuring. “We have been temporarily derailed by bad policies, but Cyprus continues to have excellent prospects.”
Source: Reuters