from The Daily Star..
July 4, 2013
NICOSIA: European Central Bank chief Mario Draghi Wednesday met Cypriot President Nicos Anastasiades in Frankfurt to help the eurozone member tackle its daunting bailout terms, an official statement said. “The focus of the meeting was the practical difficulties that arise for the banking system from the implementation of the loan agreement,” Cyprus government spokesman Christos Stylianides said in the statement issued in Nicosia.
“The two sides decided that today’s meeting will be followed by other meetings whenever that is deemed necessary and whenever practical difficulties arise,” the statement said.
In exchange for a 10 billion euro loan from the ECB, European Union and the International Monetary Fund, Cyprus agreed in March on 13 billion euros in measures to cut its budget deficit and to restructure its bloated banking system.
“At the meeting, the [Cypriot] president raised specific issues related to the practical difficulties in the implementation of the conditions of the loan agreement and the [bailout] memorandum,” Wednesday’s statement said.
Anastasiades had written to Draghi, as part of the troika of international lenders, slamming the terms of the bailout and asking for practical help to ensure Cypruscould live up to its part of the deal.
The president has insisted he does not want to renegotiate the bailout deal but called for a tweaking of the rescue plan, arguing that its terms were harsh for the Bank of Cyprus and would hinder efforts to kick-start the recession-hit economy.
With BoC being the island’s largest bank, the economy will stay shackled until it can operate without restrictions.
An ECB statement said the meeting “consisted of an exchange of views on the ongoing implementation of the macroeconomic adjustment program in Cyprus.”
“Both parties agreed that, in the period ahead, one priority is to bring Bank of Cyprus out of resolution. The asset valuation is expected for the second half of July, and the discussions will continue when these results are available,” it added.
Cyprus was forced to wind up failed lender Laiki and impose a massive levy on larger deposits in Bank of Cyprus, the island’s largest.
BoC customers with deposits of more than 100,000 euros could lose up to 60 percent of those holdings.
Those in defunct Laiki will have to wait years to see any of their money over 100,000 euros, after it was split into a good bank and bad bank – the good part being absorbed by BoC.
The unprecedented eurozone “haircut” on deposits forced the government to close all the island’s banks for nearly two weeks in March and impose draconian controls when they reopened.
At its peak the banking sector was nearly eight times the size of the island’s 17 billion euro economy, but following the bailout deal it has been downsized to around 3.5 times of GDP.