A CONVICT who used to be friendly with two prosecution witnesses in protective custody in the murder trial of media boss Andis Hadjicostis yesterday described how before he was convicted he used to provide the witnesses with drugs and they would slip away from the police guard for nights out.

Menelaos Antoniou - serving a 30-month sentence in central prisons over drugs, burglaries and forgery - yesterday stood as a defence witness in Nicosia criminal court. 

Hadjicostis - CEO of family-controlled DIAS media group and Sigma TV - died after being shot twice outside his home in Nicosia on January 12, 2010.

Antoniou described his relationship to two prosecution witnesses in the murder trial, another convict Giorgos Zavrantonas and Fanos Hadjigeorgiou who confessed to driving the getaway motorbike on the night of Hadjicostis’ murder in exchange for immunity. 

Zavrantonas is serving a 12-year term at an unspecified location for attempting to kill one of the defendants, Andreas Gregoriou, and for an unrelated conspiracy to murder five people. 

Both Zavrantonas and Hadjigeorgiou are protected witnesses and are under protective custody, but Antoniou said that many times before his current imprisonment he “sneaked out” with his friend Zavrantonas, through whom he met Hadjigeorgiou who was in accommodation next to Zavrantonas.

Last July, the police confirmed that they had to beef up security for Hadjigeorgiou after two of his ‘escapes’ were reported in local media. 

Zavrantonas and Hadjigeorgiou had friendly relations and would ask Antoniou to bring them marijuana and cocaine, the court heard.

Antoniou claimed that he had a conversation with the duo when they “were doing coke and chatting over this and that” when Hadjigeorgiou said he got €100,000 off the police. 

As a protected witness, Hadjigeorgiou may be given a new identity and funds to go abroad once the trial is over. 

During the same conversation, Hadjigeorgiou allegedly said “that he got the job done himself”, an allusion to Hadjicostis’ murder that created the expectation that, as a prosecution witness, he would get money to relocate.

Zavrantonas - already serving his sentence for attempting to kill Gregoriou - said he would get €30,000 and go to Bulgaria. 

Gregoriou was injured in late 2009 when a bomb went off in his car and spent time in hospital. 

Antoniou told the court yesterday that Zavrantonas had allegedly asked him to place a bomb in a car but he refused. “I told him if a man is going to be killed then I’m not doing this, why don’t you do it?” 

He said he did not know for whom the bomb was intended. 

But Antoniou said that he was convinced that Zavrantonas and Hadjigeorgiou had robbed an OPAP betting shop, and had complained to Zavrantonas because he had excluded him. On the night of the robbery, the witnesses had sneaked out of custody with Antoniou, the court heard. 

On the outskirts of Nicosia, Hadjigeorgiou showed Antoniou a black plastic bin bag with a gun, he said. 

Antoniou said that he had eventually realised that it was Zavrantonas who allegedly handed him over to police, after Zavrantonas tried and failed to get him to place bombs on various occasions.

Facing premeditated murder charges are former television presenter Elena Skordelli and her brother Tasos Krasopoulis who are alleged masterminds; alleged shooter Gregoris Xenofontos; and Andreas Gregoriou, the alleged fixer. 

CYPRUS is facing big challenges on immigration issues as the economic crisis has exacerbated xenophobia on the island, Ombudswoman Eliza Savvidou said yesterday.

“Despite immigration benefitting the country’s economy - since we exploited migrants mainly as cheap labour - and despite it enriching our culture with new, creative elements, traditional Cypriot society has developed a defensive and xenophobic approach towards migrants,” Eliza Savvidou told a workshop on the right of migrants in Cyprus to equal treatment in the workplace, education, health and public services.

Cyprus is currently host to some 180,000 migrants who make up one-fifth of the Republic’s population.

Around 67,000 are third-country nationals and 12 per cent of the pupils in public schools are children from migrant families.

The ombudswoman said the economic crisis plaguing the island has made the situation worse for migrants.

“It unfortunately provides fertile ground for the cultivation and display of xenophobic perceptions and behaviours, even violence,” Savvidou said. “With xenophobic public discourse and the cultivation of myths, the migrant, the ‘foreigner,’ is turned into a scapegoat for all the problems we face.”

Interior Minister Eleni Mavrou said the inclusion of migrants was high on the list of priorities of the Cypriot EU presidency.

“We should not forget that uncertainty and unequal treatment lead to insecurity and possible disregard of the rules, which result in the socioeconomic marginalisation of migrants and their families,” Mavrou said.

The minister said the difficult economic conditions experienced by most European countries increase the risk of marginalisation.

Mavrou said Cyprus is making every effort to ensure migrant inclusion in all public policies affecting the areas of information, employment, education, health and housing.

“Of course, there is often a big distance between theory and action, and I must admit that despite making steps in defining the principles and drafting the action framework, we have a long way to go on all levels of governance, and in society itself, for  effective implementation of all these actions,” Mavrou said.

A UN-hosted reception at Chateau Status in the buffer zone in Nicosia on Tuesday night fell flat when neither the president nor the Turkish Cypriot leader turned up.

Special Advisor of the United Nations Alexander Downer had held separate meetings during the day on Tuesday with President Demetris Christofias and Turkish Cypriot leader Dervis Eroglu. In the evening, a reception was held for diplomatic missions, but neither Christofias nor Eroglu showed up. 

Their absence led to speculation in the Greek Cypriot and Turkish Cypriot press as they sought to explain the absence. Was President Demetris Christofias really too busy to attend? And did the Turkish Cypriots get upset because Turkey’s ‘ambassador’ to the ‘TRNC’ Halil Ibrahim Akca was not invited?

Turkish Cypriot daily Kibris said yesterday that the reason Eroglu did not show up and his special representative Osman Ertug left the reception early was because Akca was not invited. 

But different sources said that Akca would not normally be invited to such events, as he is not a diplomat to a recognised state. 

Christofias said he was busy with the troika - the EU and IMF - discussing a bailout package for the island. But he did find time to inaugurate a building complex for the community council of Psevdas, a village in the Larnaca district. 

Greek Cypriot daily Politis said that the UN neglected to clarify whether they had invited other diplomats in addition to those of the Greek Cypriots and Turkish Cypriots. 

The newspaper also said that the UN neglected to invite some diplomatic missions. 

The UN sent all invites electronically and a diplomatic source told the Cyprus Mail there had been some problems with invitations not coming through, although this could not be confirmed by the UN. 

A NEW hairdressing service on offer for senior citizens at the Nicosia Multifunctional Centre is proving particularly popular, and yesterday received an official seal of approval with a visit by Nicosia mayor, Constantinos Yiorkadjis. 

Free hair cuts and blow dries are now available at the centre as part of the municipality’s daytime programme to provide care, support and entertainment for senior citizens.

“Working with the elderly on a daily basis I marvelled at how many would come in all prim and proper but then gradually their appearances began to suffer slightly,” said founder of the salon and one of the operators of the senior citizens’ programme, Christina Karamani. 

“When I asked the ladies why they were no longer able to keep up their appearances they told me that they couldn’t get to their hairdressers anymore or that they simply couldn’t afford it, so I saw the opportunity to offer them these services for free,” she explained.

A special hair dressing session was put on yesterday for the mayor who was accompanied by Costas Pistos, the head of Nicosia’s Technical School which often cooperates with the centre.

“The programme has been a success so far and it brings the people working at the salon great satisfaction to see the women with such big smiles on their faces after they’ve had their hair done,” Karamani explained. “It really builds up their self-esteem.”

The salon began working on November 1 and has averaged between 15-20 visitors each day. To qualify for a free visit to the salon you must be a pensioner, a member of the Nicosia Centre for the elderly and reside in the Nicosia district. The salon is open to the public too at very low prices: €5 for a hair cut, €5 for a blow dry, €10 for a hair dye and €20 for highlights.

The mayor spoke about the responsibility of Nicosia’s citizens. “For Nicosia council, the response to its citizens’ problems and ensuring social cohesion is a priority even under the difficult financial circumstances they are experiencing,” Yiorkadjis said.

The salon in the Multifunctional Centre is open everyday from 7.30am until 2.30pm except for Wednesdays. For more information or to book an appointment, call 22797855/4

LIMASSOL criminal court remanded in custody a 22-year-old man with a history of mental illness for eight days yesterday in relation to the fatal stabbing of his neighbour. 

The suspect’s lawyer did not contest the police’s request for a remand and asked for his client to be examined and kept under psychiatric supervision, as he is suffering from psychiatric problems. 

Eleftherios Constantinou allegedly stabbed and killed his 23-year-old neighbour, Apostolis Athanasiou, late on Monday night after a row over the way Athanasiou had parked his car. The victim, who had just returned home, had parked his car in the field adjacent to the suspect’s house. Following the argument between the neighbours, Athanasiou proceeded to move his car but the suspect returned to the scene with a military knife with which he allegedly stabbed the victim. 

The victim was rushed to Limassol general hospital where doctors pronounced him dead on arrival. An autopsy revealed that the victim died of massive bleeding as a result of a stab wound that pierced his chest and heart. 

Constantinou told the court yesterday that he hadn’t wanted to kill Athanasiou.

"I didn't want to kill him but he stomped on me five or six times and hit me on the head and my right eye," he said. But the CyBC reported that medical tests revealed no sign of injuries on Constantinou.

The court heard how after the first argument, Constantinou had gone towards his home issuing threats. He resurfaced with the military knife and got into another argument in the presence of Athanasiou’s parents. His mother then tried to push way Constantinou asking him to leave. The victim rushed to intervene and was fatally stabbed.  

The suspect who immediately fled the scene after the stabbing was tracked down on Tuesday around 3pm, sitting in his car on a dirt road off the Platres-Kyperounda road.  

Police said the suspect had a history of mental illness. In February 2011 he had stabbed and injured a 48-year-old man under “similar circumstances”. After being examined by a psychiatrist, Constantinou was referred to Athalassa Psychiatric ward in Nicosia where he remained for some time. 

The case was set to go to trial in March 2013, two years after the incident took place.

“All steps had been taken by the welfare services as provided by law,” the welfare services told the Cyprus Mail yesterday, when asked what measures were taken by them to protect third parties from the potentially dangerous behaviour of Constantinou. 

This case bears similarities with a murder that took place in Nicosia in January, when a 25-year-old man, who was also under the care of the welfare services, killed his sister following an argument over a laptop. He was sentenced to 12 years’ imprisonment in May.

A report regarding the case was handed by the welfare services to the labour ministry but was never made public. 

FITCH ratings yesterday downgraded Cyprus further into junk territory citing the uncertainty over the cost of bank recapitalisation and delays in negotiating a bailout, which has contributed in deteriorating economic conditions.

The agency said it has cut Cyprus’ rating to 'BB-' from 'BB+' saying it reflects the materially weaker macroeconomic outlook, “a fiscal budget that has significantly underperformed expectations and the continued high level of uncertainty over the costs associated with bank recapitalisation.”

“The delay in negotiating official support has contributed to the deteriorating economic conditions and raised uncertainties about public sector reform and the correction of macroeconomic imbalances,” Fitch said. “Cyprus' fiscal position has deteriorated significantly during 2012.” 

In the April Stability Programme, the government's stated goal was to reduce the fiscal deficit to 2.6 per cent of GDP for this year from 6.3 per cent in 2011. 

Finance ministry data show that for the nine months to September the fiscal shortfall already exceeded the level for the same period last year, Fitch said.

“Fitch expects the deficit to be over 5 per cent for 2012.”

And this despite austerity measures, including wage freezes and an increase in VAT by 2 percentage points to 17 per cent, said the agency. 

The weaker growth outlook will increase the challenge of reducing the fiscal deficit and the public debt ratio, which is set to remain substantially higher than before the recession, Fitch said.

It said negotiations with the troika have lasted longer than expected despite recent progress on setting key capital ratios for banks and the system's supervision, and February's presidential election risks further delays. 

“However, the agency's ratings are predicated on Fitch's expectation that the Cypriot authorities will reach agreement with the Troika on an official financing programme,” it said.

Last week, Moody’s placed Cyprus on review for possible downgrade citing the slow pace of negotiations with the troika and the resulting uncertainty regarding the likelihood and timing of a support package which raises liquidity risks, and evidence that Cyprus' budget deficit will be significantly larger than expected, which further increases liquidity risks for the government.

THE government was last night still trying to find some sort of common ground with international lenders on certain issues threatening to bring Cyprus’ bailout talks to a deadlock.

The two sides were still at odds over privatisations, wage indexation, pensions and the proceeds from natural gas exploitation.

Last night, talks were held at the hotel where the heads of the troika delegation were staying in a bid to resolve the outstanding issues as Nicosia appeared to be running out of time.

Despite some signs of optimism, it did not appear that the two sides had managed to bridge all their differences.

No deal was struck last night as the heads of the troika were scheduled to leave the island today.

Other members of the group already departed in the past two days.

But reports suggested last night that negotiations would continue remotely if a deal was not achieved last night.

This was despite warnings that the economy and the banking sector could suffer further from a delay in announcing an agreement.

Fitch ratings yesterday downgraded Cyprus further into junk territory citing the uncertainty over the cost of bank recapitalisation and delays in negotiating a bailout, which has contributed to deteriorating economic conditions.

Earlier, there were signs that negotiations had come to an end, as grim-faced party leaders walked out of a meeting with President Demetris Christofias saying the government did not have a contingency plan in case the talks fell through.

Government spokesman Stefanos Stefanou later said that the troika was not leaving immediately.

“We are in negotiations with them. I have said that some very difficult issues we disagree on are under discussion and we will continue this effort,” Stefanou said.

The spokesman said that the troika’s departure did not mean efforts would stop.

Stefanou said a lot of ground had been covered in the negotiations and convergences had been achieved.

The spokesman took a shot at party leaders who put all the responsibility on the government but did not offer any suggestions on how to proceed.

Negotiations with the troika kicked-off at the finance ministry early yesterday morning and were not without incident.

The state broadcaster reported that Trade and Industry Minister Neoclis Sylikiotis had words with the troika over their demand for natural gas proceeds to be used to repay the country’s debt.

Sylikiotis’ outburst almost caused the troika to leave, the report said.

On the thorny issue of privatisations, reports suggested the troika has agreed not to touch the electricity company and the ports authority but it insisted on the telecommunications company, which could fetch a billion euros if sold.

It also emerged last night that before last night’s meeting, Finance Minister Vassos Shiarly, Sylikiotis, and Stefanou, met with Attorney-general Petros Clerides to discuss the wording of certain provisions that could be included in an agreement.

THE COMMUNISTS of AKEL never miss an opportunity to advertise their alleged moral superiority and supposedly ethical, political behaviour. They claim they are always guided by noble motives, in contrast to the members of all other parties, putting the best interests of the people and society above everything else. It is all part of the AKEL myth the party has successfully promoted over the years.

The fuss AKEL is currently making about publicising the capital statements of the presidential candidates is a case in point. For several days now its spokesmen have been asking why Nicos Anastassiades and Giorgos Lillikas have not released a statement with their assets and liabilities, implying the candidates were hiding something. The AKEL candidate Stavros Malas had done this several weeks ago, allowing his backers to take the moral high ground and take shots at his rivals for their ‘refusal’ to follow suit.

Anastasiades had said he would release a capital statement when he officially submitted his candidacy, but this was not deemed acceptable by AKEL spokesman Giorgos Loucaides who held a news conference on Wednesday to accuse Anastasiades of “subterfuge and hypocrisy” and to ask why he needed another two months to submit the statement. What gave AKEL the right to dictate the time when the statement had to be released, Loucaides did not say.

It was rather rich of AKEL to accuse any rival of hypocrisy. This is the party which managed to have debts of €10 million, owed by party-controlled companies to the Bank of Cyprus, written off. It is the same party which boasted a couple of years ago that it had a surplus of €4 million and last month bailed out cash-strapped football club Omonia with a hand-out of €350,000.

In a country in which parties never make ends meet it would be interesting to know how AKEL has such cash surpluses that it can afford to make donations to football clubs.

Of course, when it comes to party funding and finances, AKEL, like the other parties, opposes transparency and the release of information for public scrutiny. Does this not smack of hypocrisy and double standards? Why should presidential candidates be obliged to make their assets public and not political parties? And did Demetris Christofias release a capital statement before the last presidential elections? If he did not, it might be an idea for AKEL, which is so committed to transparency, to demand that the outgoing president and ministers also released a capital statement when they left office.

We are not saying anyone did anything illegal, but transparency and the moral obligation to make public a capital statement must apply to everyone in top public posts.

President Demetris Christofias’ meeting with party leaders over the troika negotiations yesterday was tense and filled with recriminations.

It became particularly hostile when the political leadership heard the bailout amount, which is around €17 billion - €10 billion for the banks, €6 billion for maturing state debt, and €1.5 billion for public finances - reports said.

At this point Christofias reacted, reports said, slamming his hand on the table and asking how the amount became so high.

It is understood however, that the €6 billion will be used to roll over debt and it will not be added to the country's debt.

Reports also claimed that the president twice said that he would not sign a bailout deal that was not manageable.

At some stage he was openly critical of Finance Minister Vassos Shiarly and Central Bank Governor Panicos Demetriades whom he likened to his predecessor Athanasios Orphanides who had irked Christofias repeatedly by urging him to shore up public finances.

He also appeared angry at members of the negotiating team.

Christofias reportedly admitted he did not have an alternative plan in the event that an agreement with international lenders was not achieved.

But he said he had money for December.

The leaders were told of the risks to the banking sector’s liquidity if there was no agreement.

Speaking after the meeting, main opposition DISY leader Nicos Anastasiades said his main concern was the troika leaving the island without a prospect of them returning and the effects on the banking sector and the state’s ability to meet its obligations.

He said he handed the president a letter asking, among others, “what the plan is to tackle the possibility of a deadlock in light of the dangers ahead of us.”

Anastasiades said he expected the government to inform him of what they were planning to do to cover their obligations towards civil servants but “more importantly how to meet the banks’ potential needs in the event there is a deadlock”.

“Everyone must assume their responsibilities and we are not the ones governing,” the DISY chief said. “It is the government that must take the decisions and submit the proposals on how it tackles a dead end. We are ready to provide support.”

DIKO leader Marios Garoyian said Cyprus was playing with fire.

“It is not the time to hide; it is the time to tell the truth and face it,” Garoyian said.

The DIKO leader suggested that the government had no plan in the event the bailout talks fell through.

“It is time to have a specific plan, a specific framework of action and immediate decisions that will signal the end of uncertainty,” he said.

Ruling AKEL chief Andros Kyprianou highlighted the gravity of the situation and called on everyone to act responsibly.

But Green party leader Ioannou Panayiotou perhaps gave the best summary of yesterday morning’s meeting.

“We have noticed a disagreement between the president and his associates,” she said. “I will be blunt: a few months ago the president said ‘I don’t know where Mari is’ (the site of the deadly blast that killed 13 people and incapacitated the island’s biggest power plant). Today he told us ‘I don’t know the amount of the loan we need’.”

Nicos Anastasiades holds his head in his hands during a tense meeting with President Christofias yesterday

Cyprus and international lenders have closed a deal on the island’s bailout package reports said last night although there was no immediate official confirmation.

The reports said all outstanding issues had been ironed-out and the only thing left was the amount needed for the banks recapitalization.

A preliminary figure will be known early next month.

Earlier yesterday, President Demetris Christofias said the two sides were very close to signing an agreement.

In a written statement from Brussels where he was attending the EU summit, the president said outstanding differences could be bridged soon.

"Following the tough negotiations with the troika, and always bearing in mind the difficult situation in our country, we are very close to signing an agreement,” he said.

EU sources cited by Reuters said the agreement was nearly done but would be completed only on Friday, when troika inspectors are likely to give their approval.

Two EU officials told Reuters Cyprus had presented a final, detailed proposal including figures and that the troika would examine it on Friday.

"We are very close, but there's no deal yet," one official said on condition of anonymity. "We will have more discussions on Friday and if all goes well we will be able to finalise an agreement then."

A troika source told Reuters in Nicosia that a debt analysis and financing needs still needed to be addressed.

Members of the troika delegation outside the finance ministry on Wednesday

CONSTRUCTION workers gathered outside the headquarters of union PEO yesterday to demonstrate during an islandwide strike to demand their rights under collective agreements are met.

Many carried banners with the same message – “no to laying people off” – while others asked for respect of collective agreements.

The building sector has been hard hit and in recession for years, following a time of unsustainable growth that peaked by late 2008.

On the eve of a bailout package for the whole island and its banks, construction workers say their employers are taking advantage of the situation to justify arbitrary wage and bonus cuts.

Workers marched to the offices of OSEOK, the federation of associations of building contractors, where they handed over a letter asking that they maintain employment under previous collective agreements.

A big part of their gripe is losing jobs to cheaper workers from the EU who are given “humiliating day wages,” the letter said.

OSEOK head Costas Rousias who received the workers said that he respected workers’ right to strike, adding they could all find a solution via dialogue.

Striking builders took to the streets yestreday

WINES can become ambassadors for Cyprus, transmitting the island’s identity and character, agriculture minister Sophoclis Aletraris said yesterday at a symposium on Cyprus wines. 

“Wines… can be transformed as ambassadors for their countries of origin. They carry, that is, the country’s identity and our traditions, instilling in the consumer a point of recognition,” Aletraris said. 

Aletraris said that the state would continue working towards promoting the industry abroad and using it as a way to encourage regional development.

“For rural Cyprus, growing vines has continued being a stable job and a worthwhile source of income,” Aletraris said, adding that this came with the responsibility of securing an industry for the future.

Events such as yesterday’s symposium, give people the opportunity to become acquainted with the country’s wine culture and wealth. But the minister said that an industry’s “dynamism and prospects” was interconnected with the environment, economy, and development. 

“We need to plan ahead, be flexible, and watch developments closely,” he said.

THOUSANDS of bankruptcy orders are piling up in the courts, suggesting at the very least that bankruptcies this year have doubled compared with the previous few years, according to figures mentioned this week at the House legal affairs committee. 

Up until the first week of November, a total of 4,828 bankruptcy orders were still pending in courts, the head of the legal affairs committee, DISY’s Ionas Nicolaou said.

He said that those figures are not yet part of the statistics of the office of the registrar of companies and official receiver whose own yearly figures show hundreds rather than thousands of bankruptcies and liquidations.

The official receiver’s latest bankruptcy statistics for 2012 show that up until October there were 472 bankruptcy court orders for individuals, and 1,005 for companies under liquidation. 

In the previous year, about 849 court orders for individuals were received, and 1,163 liquidation orders for companies. Most company liquidations are voluntary.

But Nicolaou’s figures were much higher because they involved orders that are still pending in the courts.

As of September 2011, the bankruptcies and liquidations section of the receiver does not accept any court orders “which are not accompanied with the payment of €300,” the department says on its website. 

And vacant positions in courts are not being filled due to a public sector hiring freeze, making it harder to process a backlog of documentation. 

“These large figures are worrying because they make it obvious that a large number of people and companies are going bankrupt,” Nicolaou said. 

But they may not be the whole picture. 

A former executive at a major bank told the Cyprus Mail that when it comes to bigger companies owing millions, it is not in the interest of the market or the creditors – the banks – to request the court to issue a bankruptcy order.

“The banks want to maintain the company’s value, avoid creating a pessimistic climate, and retrieve their funds, so will try to manage the situation themselves,” the former executive said.

The House legal affairs committee discussed setting a five-year expiration date on court orders and raising the threshold of money owed before bankruptcy can be declared. 

Nicolaou said that the procedure should shift focus towards helping bankrupt companies to manage their property. 

DIKO’s Nicolas Papadopoulos said the figures were a response to anyone still doubting the economy’s problems. 

Once the office of the companies’ registrar receives a court order it takes control of assets as the official receiver, but cannot sell property unless it will be wasted otherwise (e.g. if it’s perishable). 

The official receiver takes an inventory of a company’s property – immoveable, shares, companies, bank accounts – and may only sell what is otherwise perishable. When all assets are accounted for, the receiver can call creditors to a meeting to decide whether they still insist on a bankruptcy order and want to appoint a trustee to the property. The trustee and creditors have the right to appoint a committee to oversee a property’s management, although according to the companies’ registrar Spyros Kokkinos, it is rare for a committee to be set up in order to manage a company’s assets. 

THE Popular Bank yesterday filed a notice of dispute to the Greek government, seeking equal treatment with other lenders operating in Greece.

In a filing to the stock market, the troubled lender said the law office of Skadden, Arps, Slate, Meagher, & Flom (UK) LLP, acting on its behalf, has filed a notice of dispute based on the provisions of a 1992 bilateral agreement between Cyprus and Greece concerning the mutual promotion and protection of investment.

“Based on the provisions of the bilateral agreement, the bank seeks equal treatment and similar remedies as other lenders operating in Greece,” the announcement said.

Popular was forced to ask for €1.8 billion in state assistance after taking heavy losses from its exposure to Greek debt and being unable to raise the necessary regulatory capital through private funds.

Its large exposure to Greece’s economy has also hit the lender hard.

Greek banks have received some €50 billion, as part of an international bailout, to replenish their capital.

Popular expects that access to the available liquidity and capital support mechanisms would contribute substantively to the significant efforts exerted by the bank to tackle the effects from its operation in Greece.

The agreement provides that any dispute between a contracting state and an investor within its domain, which comes from the other contracting state, is resolved amicably.

But if the dispute is not resolved, the lender intends to ask for arbitration by the USA-based International Centre for the Settlement of Investment Disputes, as provided by the agreement.

“The bank wishes to cooperate with the Greek authorities for a swift resolution of the dispute,” it said.

AIMING for a balanced budget with a smidgen of a surplus, Nicosia municipality yesterday announced that it was planning to spend about €32 million in 2013.

The municipality expects to receive €32,159,981 during the year and to spend €32,157,621, with the budget allowing for a surplus of €2,360.

“Preparing the budget was done during one of the most difficult conditions in the light of the worst financial crisis in our recent history,” the municipality said, adding that budget discussions “included municipal expert consultants for the first time”.

All municipalities have been struggling to balance their budgets and contain their deficits after the state and parliament reduced their collective budget by €18 million.

Nicosia expected to get about €4.0 million more than it did, Nicosia mayor Constantinos Yiorkadjis previously said. 

Yiorkadjis said he would enforce cost cutting measures to keep the 2012 deficit to €2.7 million, while the municipality said yesterday they were expecting the deficit to lie at €3.0 million by the end of the year.

Yorkadjis took over as mayor in January this year following last December’s elections, and a few months later, in May, he called a news conference to announce a series of cost-cutting measures to deal with financing problems.

The municipality yesterday said it has been working to correct problems relating to the rising prices of utility bills and inelastic expenses such as staff wages, among others.

The 2013 budget “serves the need of making the municipality viable at a time that the government is unable to support local administration,” Nicosia municipality said. 

“Our priorities are increasing productivity, maintaining quality services, keeping workers and residents safe and safeguarding our ability to proceed with development plans for our city.”

A voluntary retirement scheme is underway aiming to reduce a 300-strong workforce by at least 50, a move which the municipality called “daring”.

“The capital’s municipality, its staff and political leaderships have been daring where others have been holding back. Financial restructuring has started and everyone can see the results,” the announcement said.

But the municipality said that “reducing expenses can only do so much before it starts impacting the municipality’s ability to function, so it is imperative that the municipality increases its expenses.” As such rubbish collection charges for residents will increase by €19 a year in what is due to be a series of yearly increases “to avoid an expected abrupt hike in rubbish collection fees over one year in 2015, when the waste processing plants are expected to operate.” 

The government will set up waste processing facilities to comply with EU legislation on waste management that is expected to increase fees because of the cost of running them.

The municipality said that it acknowledged these financially dire times and was not raising the price of rent, professional tax, and social and sports’ services.

Nicosia mayor Constantinos Yiorkadjis has spoken of needing to stick to cuts

LEGISLATORS yesterday rushed through an amending law allowing the state to guarantee bank bonds and new loans by an additional €3 billion, bringing the total amount to €6 billion.

Earlier this month, parliament passed a law providing for state guarantees for up to €3 billion, although the initial draft of the government bill had called for guarantees double that amount.

Voting for the amendment yesterday were 39 MPs from DISY, AKEL, DIKO and EDEK; against were two deputies of the European Party and independent MP Zacharias Koulias.

The purpose of the state guarantee scheme is to facilitate the access of eligible credit institutions to medium-term funding. It is part of efforts to stabilise the local financial sector up to the end of the year.

The scheme is open to all credit institutions incorporated in Cyprus, including subsidiaries of foreign banks and cooperative credit institutions. Beneficiaries have to pay a remuneration that is aligned with EU state aid rules.

Moreover, beneficiaries will be subject to behavioural commitments to avoid any abusive use of the state support. These include limitations on expansion and marketing and conditions for staff remuneration and bonus payments.

The amended legislation also mandates that any single state guarantee exceeding €1 billion must be submitted to, and sanctioned by, the House Finance Committee. Previously, that amount was set at €500 million.

In October, Cyprus notified the European Commission of plans to introduce a public guarantee scheme for credit institutions. The guarantees will be covering, against remuneration and eligible collateral, new loans concluded and/or new bonds issued before 31 December 2012, with a maturity of up to five years.

Cyprus applied for a full EU rescue package in June after its two largest lenders could not meet new capital reserve limits owing to huge losses they sustained on their exposure to bailed-out Greece.

CYPRUS’ economy will contract by 3.5 per cent in 2013 as the government aims for a 4.4 per cent deficit, according to the state budget that was submitted to parliament yesterday.

The government expects the economy to contract by 2.4 per cent this year. 

Unemployment is expected to reach 13.8 per cent next year and will peak at 14.2 per cent in 2014 before dropping a year later.

According to Finance Minister Vassos Shiarly, the budget includes measures that have already been agreed with international lenders like pay cuts and a freeze in recruitment in the wider public sector, taxing games of chance and lowering the tax-free threshold of immovable property.

“The 2013 budget is an austerity budget that restricts operating and non-productive expenditure to a minimum,” an accompanying note said. “Prospects for 2013 are not favourable since further contraction of economic activity is expected.”

According to the budget, the government expects to receive some €7.6 billion in 2013 while expenditure will reach €9.5 billion.

The ministry said putting measures in place was the only choice to correct the imbalances, restore macroeconomic stability and win back market and investor confidence.

Cyprus has been effectively shut out of international markets since May 2011 due to the high yields on its bonds.

The government secured a €2.5 billion loan from Russia at the end of 2011 but the heavy losses incurred by the island’s biggest banks after the Greek debt write-down forced it to seek assistance from its EU partners in June.

“Containing the public deficit with a simultaneous reversal of the upward course of the public debt… will significantly limit our financing needs and our dependence from the money markets,” the ministry said. 

Lower financing needs would free resources for development, modernisation and renewal of the economy’s infrastructure, it said.

Cyprus’ public debt as a percentage of GDP is expected to reach 85.8 per cent this year and 92 per cent in 2013 – not including the bailout.

Unemployment in 2012 will reach around 12 per cent and rise further between 2013 and 2015.

The highest jobless rates are recorded in construction, trade and the hotel and restaurant industries.

Unemployment will gradually drop only with the recovery of the economy that could start with the implementation of structural measures, the ministry said.

Finance minister Vasos Shiarly hands the 2013 budget over to house president Yiannakis Omirou

THE troika has apparently agreed to all of the government’s main positions on the natural gas issue, it emerged last night only hours after commerce minister Neoclis Sylikiotis had said huge differences remained between the government and foreign lenders on the management of the island’s future gas proceeds.

The AKEL administration was insisting that only a fraction of the gas proceeds go toward paying off the debt, with the rest going into a special investment fund and a part used for energy infrastructures. These demands were accepted, CyBC reported last night.

The dispute over the gas proceeds was said to be a deal breaker for an overall state bailout.

Speaking to CyBC radio earlier yesterday, Sylikiotis protested that the foreign lenders wanted all future gas proceeds to be subject to fiscal regulations and monitoring.

This amounted to ceding national sovereignty, he added.

Sylikiotis repeatedly declined to reveal the troika’s precise proposal on natural gas. But pressed on the subject, he said generally that the key dispute revolved around the troika’s insistence to have a say in the management of gas revenues.

This included how the cash would be spent on infrastructures, he said, hinting that the troika was overstepping its boundaries.

“If tomorrow the troika tells us that the government’s stake in LNG infrastructures should be only 10 per cent, should we accept it?” said Sylikiotis.

He reiterated the government’s position that the state must retain a leading role in all infrastructures.

Responding to a hypothetical question, the minister said that should Cyprus not meet its obligations under a possible loan memorandum, the troika might then ask the government of the day to pour an even greater percentage of gas proceeds into paying off the national debt.

“From the outset, gas revenues would be subject to fiscal regulations,” he said.

He went on to claim that the troika’s proposal submitted to the government contains no reference to an investment fund for future generations.

In short, the government’s take was that the troika wanted to commit all future gas reserves to the budget so that they could then be diverted to servicing the national debt.

Sylikiotis reiterated also that the government should reserve the right to use the island’s gas reserves as collateral for a loan, but that the loan should be used for infrastructures, not toward paying off the national debt.

Using the gas reserves as collateral would be possible, for example, through an Initial Public Offering (IPO) and the issuing of shares by the state hydrocarbons company.

But before this could be done, the reserves would have to be proved so that they could be assigned a definite cash value, commented Constantinos Hadjistassou, an energy researcher with the University of Cyprus.

At the moment, Hadjistassou told the Cyprus Mail, gas reserves in offshore Block 12 are estimates; only once Noble Energy carries out appraisal drilling at the well will the reserves be proved. Follow-up drilling is expected in the first quarter of next year.

Media reports had already suggested that the government was misrepresenting or exaggerating the disagreements over gas. Earlier this week, Phileleleftheros published what it claimed were excerpts of the troika’s proposal.

Citing the document, the paper said the troika advocates the establishment of a special fund to handle the government’s gas revenues.

“In order to ensure transparency, accountability and flexibility, the fund shall rely on a solid legal basis and government structure deriving from internationally recognised practice,” the cited document said.

The troika went on to say that clear regulations must govern cash inflow and outflow, and that these rules must be implemented “as part of Cyprus’ budget, taking into account the development of a hydrocarbons industry as well drops in the public debt.”

Phileleftheros said also that the troika has asked the government to amend existing legislation to incorporate these rules.

Troika representative IMF economist Delia Velculescu leaving the island yesterday

PRESIDENT Christofias yesterday issued a written statement saying the government was ‘very close’ to signing a memorandum of understanding with the troika. He said: “After tough negotiations with the troika, always taking into account the difficult conditions the country is going through, we are very close to the signing of a memorandum with the troika.” The differences that remained were ‘very few’ and could be overcome very soon.

We wish we could believe him, but the man’s trustworthiness is zero. This might be just another ruse to put back, by a few more days, having to confront the huge problems his incompetence and irresponsibility have been causing the country. After all, sweeping problems under the carpet in the vain hope they will eventually disappear, has been the style of his presidency from day one. 

It is entirely possible that he made yesterday’s statement in order to calm things down, after Wednesday’s farcical meeting with the party leaders, at which he confirmed everyone’s fears that he did not have the foggiest idea what to do about the mounting problems facing the economy. He even acted surprised when he was told that the bailout amount would be €17 billion, claiming that nobody had told him. If this were the case, why did he never ask to find out? Was he so disinterested in the bailout that he did not bother asking any of his associates how much we needed to borrow? The president, who would have to put his signature on the memorandum, did not have the basic curiosity to ask the amount of the loan.

Now we are supposed to believe that we are very close to signing a bailout. He waited for the troika to leave the country without an agreement and a few hours later made the statement, which is very difficult to believe given how he has been taking the troika for a ride over the last few months. 

He was given the troika’s proposals at the end of July and refused to look at them until October. Once his team prepared its ludicrous counter-proposals, he started imploring the troika to visit Cyprus so the bailout could be finalised. When it arrived, the government started leaking selective information from the negotiations, aimed at building public opposition to a bailout and justifying the planned rejection. And it refused to budge on inconsequential issues like CoLA, the privatisation of Cyta and the rational management of our hydrocarbons so there would be no deal. 

Last night it was reported that an agreement had been achieved but, given the President's record, only when he puts his signature on the bailout agreement would we be able to believe him. And we are sure the same goes for the European Commission, ECB and IMF. 

AFTER drawn-out talks here in Nicosia the government and foreign lenders are on the verge of striking a deal for a state bailout, reports said last night.

Reuters cited EU sources saying the agreement was nearly done but would be completed only today when inspectors from the European Commission, European Central Bank and International Monetary Fund – collectively known as the troika - are likely to give their approval.

Two EU officials told the news agency the Cypriot side had presented a final, detailed proposal including figures and that the troika would examine it on Friday.

“We are very close, but there's no deal yet,” one official told Reuters on condition of anonymity. “We will have more discussions on Friday and if all goes well we will be able to finalise an agreement then.”

Local media reported on the broad strokes of the deal. After intensive negotiations on Wednesday night and throughout yesterday, the two sides hammered out an agreement apparently bridging their differences on the major outstanding issues: pension reform, management of gas revenues, privatisation of certain semi-governmental organisations, and inflation-linked wage indexation.

The state broadcaster said that on natural gas, the troika had accepted the government’s position for a part of the proceeds to go toward paying off the debt, with the rest going into a special investment fund and a part used for energy infrastructures.

The troika apparently got satisfactory assurances that an amount would be set aside for servicing the national debt.

It was agreed also that the semi-governmental Cyprus Telecommunications Authority (CyTA) would not be privatised unless the national debt became unsustainable, reports said.

The Social Security Fund (SSF) would not be scrapped, and the government’s debt to the fund would not be written off; nor would the Cost of Living Allowance (CoLA) be abolished.

CyBC said CoLA would be slashed by 50 per cent once payment of it resumed in 2016. Thereafter it would be paid only once a year.

Meanwhile payment of 13th salaries to civil servants would continue.

Supervision of cooperative banks would be transferred from the Commerce Ministry to the Central Bank, reports said.

An agreement on the key issue of the bailout amount for the banks had yet to be “locked in.”

The economic adjustment programme would amount to €1.1 billion, compared to the troika’s €1.2 billion and the government’s €975 million.

Central Bank governor Panicos Demetriades was said to be instrumental in persuading President Christofias to take the deal.

The two spoke on the phone yesterday morning; the top banker reportedly advised Christofias that failing to secure an EU/IMF loan now would sink the banking sector.

There were signs a deal could be in the air when earlier in the day Christofias said Cyprus was very close to a bailout agreement with international lenders whose delegation left the island yesterday after the latest round of talks.

“After tough negotiations with the troika, and considering the difficult conditions our country is going through, we are very close in signing the memorandum with the troika,” Christofias said in a written statement from Brussels where he is attending the EU leaders summit.

The statement followed talks with the troika on Wednesday night on the thorny issues of natural gas revenues, wage indexation and privatisations.

“We are on track and very soon we expect to have the final arrangement,” Finance Minister Vassos Shiarly said. “When the president says we are close, it means we are close.”

Assuming that Cyprus has a deal in place, it could be discussed by the Eurogroup on December 3.

It does not mean however that it would be approved immediately by the Eurogroup.

After that it would also need approval by parliaments of certain eurozone countries before the first tranche of financial assistance was released, Shiarly said.

Main opposition DISY leader Nicos Anastasiades was poised yesterday to publish the letters he sent Christofias more or less warning him that he will be held responsible if nothing was done to reverse the course of the economy.

But following the president’s statement, Anastasiades said he will avoid critique “and any reference to the consequences and risks faced by the country.”

“We are watching the developments with concern and I sincerely hope our country avoids the worst through a mutually accepted conclusion,” he said.

Speaking on state radio yesterday morning, Anastasiades gave a hint of the contents of his letter to the president.

“Gross negligence is a crime too,” he said.

Christofias’ comment from Brussels followed a tense Wednesday meeting with party leaders who were briefed on the progress of the negotiations with the lenders.

Reports suggested Christofias appeared not to know the potential amount of the island’s bailout.

When he heard that the figure could reach €17.5 billion, the president reportedly slammed his hand on the table, asking how the amount became so high.

Yesterday, Shiarly played down the affair, saying it was amazing how a simple statement created so much fuss.

“These figures have been discussed repeatedly,” the minister, said.

Cyprus bailout is made up of two parts – bank recapitalisation and refinancing the state’s current obligations, €6 billion, which covers the period up to 2016.

The rest, €1.5 billion, will be used to finance the fiscal deficits.

“Consequently, this amount reaches around €17 billion,” Shiarly said. He added however that the €10 billion needed by the banks was not a figure mooted by the government.

That amount is expected to be determined by an audit of the banks’ loans portfolios whose preliminary findings will be issued early in December.

“I am surprised… that such a small misunderstanding in the calculation of the amount could have created such an upheaval,” the minister said.

outrage DISY leader Nico Anastassiades speaking to the press yesterday