Cyprus passes bailout MoU; Vote as divisive as ever

The 10 bln euro bailout agreement scraped through parliament in a razor-thin vote Tuesday, with Cyprus narrowly escaping default in the most trying 40 days of its recent history.
MPs from the ruling coalition of the Democratic Rally (DISY) and the Democratic Party (DIKO) pipped the populist anti-bailout alliance of the communist Akel, socialist Edek and Green parties, with 29 votes to 27, ensuring that the first two instalments from the EU-IMF bailout will be paid in May and June, respectively, securing the smooth rollover of sovereign debt maturing next month.
This means that the civil service wages and pensions, that account for more than 60% of the state budget, will be paid, albeit with some delay and after a dose of austerity. On the other hand, President Nicos Anastasiades has announced a series of measures that will attempt to combat record unemployment hovering at 25%, while extensive reforms in government should revive confidence in the economy that has suffered due to the banking crisis and the acute shortage of money supply in the private sector.
The bailout Memorandum of Understanding, already approved by the paymaster German Bundestag, will probably see some government services privatised, while reforms and cutbacks will continue to be implemented, bringing wages in the public sector down to the levels of the private sector. The deal also saw the resolution of once mighty Popular Laiki Bank that has been absorbed by leading lender Bank of Cyprus, burdened with a 9 bln euro bill inherited from the European Liquidity Assistance mechanism.
In a small measure of comfort to the thousands of bond holders and depositors who will see at least 37.5% of their unsecured savings wiped out in order to recapitalise Bank of Cyprus, the inquiry into the banking crisis is well underway, with some testimony pointing to the purchase of Greek government bonds as the core of the problem. An investigation by Reuters also suggested that more than 28,000 files relating to these transactions between 2009 and 2011 have been wiped out of Bank of Cyprus computers leaving little evidence of fraud or mismanagement.
"Unfortunately the (bailout) is a one-way street for us. It will avert disorderly default and gives, albeit with many hurdles, some prospect of getting us out of the storm," said Averof Neophytou, the newly-elected head of DISY.
Opposition parties argued that the bailout would keep Cyprus in perpetual bondage to foreign lenders.
Communist AKEL, in government until it lost presidential elections in February, said Cyprus should seek alternative forms of funding, including possibly an exit from the euro currency. However, it had no alternative to suggest, while former Foreign Minister and staunch anti-bailout supporter Yiorgos Lillikas reiterated his call for Cyprus to sell future contracts of natural gas finds.
US-based Noble Energy is expected to conduct a second exploratory drill in its offshore gasfield next month, after which it could take up to 6 months to determine the size of proven deposits and what value they could have.