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Credibility and restoring confidence were the major themes at an event organized by the American Chamber of Commerce in Cyprus (AmCham Cyprus) on the occasion of the upcoming Cyprus Presidency of the EU Council.
After the opening speech by AmCham Cyprus President Miltiades Miltiadou, Deputy Minister for European Affairs, Andreas Mavroyiannis and Hendrik Bourgeois, President of AmCham EU, who headed a high level delegation to Cyprus relating to the upcoming Cyprus Presidency of the EU Council, spoke about the many challenges facing Cyprus. Both distinguished speakers made particular reference for the need to maintain our credibility and restore confidence.
I was particularly impressed when Bourgeois reminded us that Europe always solves its problems only after a crisis emerges. I share his optimism that Europe will eventually manage to solve the many chronic issues now confronting it, including high unemployment, sovereign debt crises, unsustainable deficits and low growth.
But in order to solve a problem, somebody needs to take action. While Ireland, Spain, Italy, the UK and before them the Baltic states of Latvia, Lithuania and Estonia took and are taking painful measures to correct past mistakes, Cyprus has opted to follow the example of Greece and simply take no action.
Successive Cypriot Finance Ministers have given promises to their colleagues at the EuroGroup on how Cyprus will lower its deficit and achieve financial targets set by this government, yet we have failed to deliver and now Cyprus risks losing its credibility among our EU partners.
Take Spain for example. Over the weekend, Spain asked and received a pledge from the euro-group for loans up to EUR 100 bln for rescue of its banks.
But because Spain has embarked on an ambitious cost-cutting and fiscal restructuring plan, Spain’s bank bailout comes without the same conditionality as the programmes for Ireland, Portugal and Greece that were agreed with the troika – the European Commission, European Central Bank and the International Monetary Fund.
Under the existing troika programmes countries are subject to rigorous quarterly inspections by EU and IMF officials and must sign up to a detailed memorandum of understanding and strict targets covering tax, spending and social welfare. These quarterly visits have become political lightning rods in Athens, Lisbon and Dublin where there is public concern over a loss of economic sovereignty.
It does not need a genius to guess that when you lose your credibility, it becomes even more difficult to convince others to trust you again, and Cyprus is doing exactly that. If Greece could say it did not know how the crisis would unfold and how it would impact its citizens, Cyprus cannot say the same, since it is obvious that what is happening in Greece is repeating in Cyprus with a time lag of 1-2 years.
After President Christofias declared that he intends to take NO ACTION and torpedoed his Finance Minister’s plan of action before Vassos Shiarly could even embark on his mission, all we can do now is sit on the sidelines and wait until February 2013 Presidential elections, when a new President will be sworn in.
But I’m afraid February 2013 in Cyprus will be similar to events that started unfolding in February 2009 when George Papandreou came to power in Greece. By then the fiscal condition in Cyprus will have deteriorated to such an extent that it will be very difficult and painful to restore Cyprus’ competitiveness.
Personally I doubt if any of the current candidates seeking to become the next President of Cyprus will have the courage to take resolute action to restore Cyprus’ competitiveness, increase productivity and create conditions for growth and job creation.
Presidential hopeful and DISY President Nicos Anastassiades in remarks after meeting with SEK trade union last week said he will find the cost savings from other sources and not necessarily through salary cuts. That is a very unfortunate statement since in order to restore competitiveness and fiscal discipline, Cyprus needs to trim its inefficient civil service, cut waste, force the island’s banks to change their modus operandi, clear up the mess created from the property bubble, liberalise and open up the many professions to more competition and proceed with painful restructurings.
Once again, I believe our only salvation is when the Troika takes charge of our economic policy and proceeds with the painful measures because the current president and those who will follow him, do not have the courage to do what is needed.
(Shavasb Bohdjalian is a certified Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10 and approved by the Cyprus Stock Exchange to act as Nomad for listings on the Emerging Companies Market. Eurivex offers complete packages and solutions for all types of listings on the ECM/CSE. The views expressed above are personal and do not bind the company and are subject to change without notice)
