Cypriot president, Nicos Anastasiades, is holding talks with thetroika (EU, ECB, IMF) in the last attempt to secure €10 billion,which will save the debt-hit Mediterranean island frombankruptcy. Under the latest plan, a one-time levy of 20 per cent would beplaced on uninsured deposits of more than €100,000 at the Bank ofCyprus, with a separate tax of 4 per cent assessed on uninsureddeposits of more than €100,000 at all other banks in thecountry.A professor of Political Economy at the University of Nicosia andthe president of the Cyprus Center for European and InternationalAffairs, Andreas Theophanous, believes that the shock therapyimplemented by the EU in Cyprus is the wrong solution as it’ll onlyworsen the economic situation in the country. RT: A crucial meeting is underway in Brussels as thepresident of Cyprus is discussing the crisis with the key figureswho hold the country's fate in their hands. What's your prognosisof its outcome?AT: It’s very difficult to make a forecast. There is apolitical willingness by the government [of Cyprus] to reach anagreement for the bailout with the Troika, but it seems that theyare making it more and more difficult with new and new demands. Thefear that exists is that in case that all demands of the troika areaccepted, it’ll be very difficult for this agreement to be viablein the sense that it’ll throw the country into a huge fiscal cliff,huge recession and a vicious circle. And it’ll be extremelydifficult if not impossible to get out of it. RT: Cyprus is desperately trying to prevent business fromfleeing the country, even the Archbishop of Cyprus is reportedlyplanning to hold talks with foreign investors. How destructive doyou predict the outflow of capital could be if the measures areimplemented?AT: You see, what has happened lately was unprecedented.When they announced the measures last week it led to a big panic. Ithink the economic problems of Cyprus could be addressed with agradualist approach. These shock therapies create more problemsthan they resolve. We think in Cyprus that there’s a hugesolidarity deficit in the European Union and in the Troika, whichis much higher than any fiscal deficit or public debt of anycountry in the European south. RT: Many people now face losing up to a fifth of theirlife savings. How are banks planning to restore their customers'trust after something so many view as outright robbery?AT: This is unprecedented. Cyprus lost 25 per cent of itsGDP almost two years ago when it was the haircut of the Greek debt.And there has been no compensation for that. If these ideas thatare being discussed are implemented – there would be anotherhaircut of Cyprus’ GDP, which will be around 40 per cent. It’ll beimpossible, I think, to get out of such a mess. I find it verydifficult for this to be viable. Even if there’s agreement, even ifit goes through the parliament, I find it extremely difficult forthis to be viable in the next few months to come. … Read More
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