Cyprus & World News

Is Troika leaving Cyprus empty-handed?

14 November, 2012

The three teams of Troika technocrats from international lenders wrapped up their meetings on Tuesday with all-day talks at the Ministry of Finance and the Central Bank where they discussed fiscal and macroeconomic issues, as well as the restructuring of semi-governmental organisations.
Troika technocrats insist that the island’s Cooperative banks should consolidate to just 30, from the 95 at present, while their supervision should fall under the Central Bank of Cyprus and not the Cooperative Central Bank, similar to the Rabobank model, which the communist-led administration has opposed.
On Monday, they discussed the cooperation between the private and public sector, tender procedures, the real estate market and ways to evaluate it, and property tax.
At the Central Bank, the third Troika team continued discussions on the creation of an asset management company, the liquidity and transparency of the financial sector, and the internal bank audit.
On Wednesday, the Troika teams are expected to assess the meetings they have been having in Cyprus since last Friday, in order to determine if it is necessary to begin a new round of talks on certain issues.
Although the inspectors from the European Commission, the European Central bank and the International Monetary Fund have insisted that there is no room for further negotiation, President Christofias said over the weekend that the bailout terms proposed by the Troika were politically driven and would probably reject them, without, however, giving any alternative solution to the island’s huge debt problem.
This caused the opposition Democratic Rally (Disy) to criticise the President’s declaration that was emulated by the communist-Akel party leader, while Central Bank Governor Panicos Demetriades seems to have the opposite view, that the talks with the Troika officials were held in a “constructive and friendly” environment, having achieved progress and expecting further progress by the end of the week.
A similar optimism was expressed by Finance Minister Vassos Shiarly, the Disy communiqué said, adding that the inconsistency between the President and his two main associates in the bailout negotiations is extremely dangerous.
“This destroys what little credibility Cyprus still has left,” Disy said.
The Troika inspectors are also reportedly concerned that Cyprus will not be able to sustain its current debt levels unless it goes ahead with austerity measures that have not yet been implemented, while the bank’s recapitalisation could reach 12 bln euros, double of what the government currently estimates.
The issue of the CoCo bonds and their conversion to bank shares would mean that the Cyprus GDP would be burdened with an additional 8%, while the present-day share prices mean the securities would, in effect, undergo a 70% haircut.