THE ELECTRICITY company (EAC) last night approved a state request for a €100 million loan following a stark warning that without the cash the government would default in the next few days.

“If these additional financing needs are not secured we will be talking about a state default in the next few days,” finance ministry permanent secretary Christos Patsalides told the House Finance Committee earlier yesterday. 

Patsalides said this would also drag semi-government organisations under, since it would put the state into selective default and annul any guarantees given to them.

Telecommunications company CyTA had already agreed to lend the state €100 million - through three-month bonds - on condition that the EAC would also chip in.

The ports authority has also pledged some €38 million

The cash will come from the workers’ pension funds.

EAC’s decision was announced last night, following a lengthy meeting of the fund’s managing committee.

Earlier, it was reported that the committee had rejected the request - the reports were immediately denied.

“With a high sense of responsibility to the fund and the state, the committee and the EAC board have unanimously decided to respond positively to the state request under certain conditions,” chairman Giorgos Pistendis said.

He said the terms have been initially accepted by the government, which was expected to send its reply in writing today.

The EAC wanted assurances through a cabinet decision and not just those of the finance ministry.

The finance ministry said it needed €420 million in total to cover its short-term needs. 

Some €300 million were needed in the coming days.

Around €170 million have been secured from other sources, Patsalides told MPs.

It is understood that the bulk of that cash came from two foreign banks operating in Cyprus.

Patsalides said it was important for a decision to be made in the next 24 hours.

The permanent secretary said that one ratings agency had already asked for a telephone conference after the finance committee meeting since they considered that not securing the cash would constitute a credit event – this occurs when an organisation defaults on an important transaction.

Reports said the agency was Standard and Poor’s.

During the House Finance Committee meeting, Pistendis highlighted the need for state guarantees that the cash would be returned.

At this point Attorney-general Petros Clerides angrily pointed out that the EAC had not bothered with guarantees when they handed over their cash to stockbroker Yiannos Andronikou who was later jailed for seven years after he was found guilty of stealing some €8 million from the fund.

DISY deputy chairman Averof Neophytou proposed, as an additional guarantee, the state land next to the Hilton hotel.

Clerides again intervened, suggesting that this would be a disgrace.

“Do we want to humiliate our state ourselves?” he said. The attorney-general wondered why foreigners would want to lend money to the state when Cypriots themselves did not trust it.

Patsalides said it would be an unprecedented worldwide event for the state to provide additional collateral and guarantees for state bonds.

He also sought to allay fears of a possible write-down, similar to what happened with Greece.

“It was not done on short-term state bonds,” he said, adding that the troika want the short-term market to function.

Outside parliament, CyTA workers gathered to protest against their board’s decision to lend cash to the state.

The workers, who were kept at a distance from the building, heckled CyTA chairman Stathis Kittis when he arrived for the meeting.

In a letter to the finance committee, CyTA unions said this was “unacceptable and illegal” citing various legal points.

Daily Politis reported yesterday that CyTA workers had filed lawsuits asking for injunctions that would stop the organisation from lending the state any money.

Finance ministry permanent secretary Christos Patsalides (right) with Attorney-general Petros Clerides and DISY’s Averof Neophytou.

WELFARE is still failing to work alongside other state services to ensure that children’s rights are secured, Commissioner for Children’s Rights Leda Koursoumba said yesterday.

Koursoumba was handing over her 2011 annual report to President Demetris Christofias at the presidential palace. 

“There are gaps in the potential for collaboration among state services to support families,” Koursoumba told journalists afterwards. 

There are “enduring problems” in the sectors of education, health and social welfare where “there has been no improvement despite efforts,” Koursoumba added.

Koursoumba said in her report that she has had to intervene after receiving a complaint that social welfare failed to offer any psychological support following claims that a father was sexually abusing his child. Social welfare investigated the case and ruled there was nothing incriminating against the father, so ceased offering psychological support. 

“While the child underwent the painful procedure of the investigation of the claims of sexual abuse by [the child’s] father, no support was offered to restore the [child’s] psychological and emotional state,” Koursoumba said. 

The commissioner has also had to appeal to the education minister and the labour minister after a mother complained that her 12-year-old was receiving no support from social welfare following the death of the child’s father. “According to the complaint, the child had emotional and behavioural problems following the father’s death,” Koursoumba said. Following her involvement, social welfare worked more closely with the school to tackle the child’s problems both psychologically and practically. 

Another mother complained that she and her children did not receive the psychological support she had requested after her estranged husband killed himself. Her daughter had problems with alcohol abuse, started self-harming and stopped school, the report said. Even before the suicide, family court had asked social welfare to get involved. Koursoumba said that the mother’s complaint “raised questions” about how social welfare handled such cases, despite assurances from social welfare and the labour ministry that the family was being taken care of.

Other ongoing problems involve children of migrants and asylum seekers. 

Although the child commissioner’s office has appointed lawyers to represent unescorted underage asylum seekers, the state’s “asylum service refuses to implement the law” and will not accept the lawyers, Koursoumba said. 

There are also occasions when families are broken up and the main breadwinner is forced to leave the country “leaving the children behind in Cyprus with no financial resources” and no dignified way of living on the island, Koursoumba said. Sometimes families who have lived in Cyprus for years pending an outcome on their political asylum application are told to leave without bearing in mind the child’s best interests, Koursoumba said. 

The full report is available online at www.childcom.org.cy (Greek only) and covers a number of issues including family violence, sexual abuse, the internet, bullying, and various ongoing programmes.

Koursoumba thanked Christofias for his efforts which “have made a difference”.

 “I believe that a society’s respect for children’s rights demonstrates how civilised it is,” Christofias said.

HOMOPHOBIC BULLYING is a “real problem” in schools which needs to be tackled through a series of measures taken by the Education Ministry, said Ombudswoman Eliza Savvidou in a recent report.  

According to the report on homophobia in education and the handling of homophobic incidents compiled by the anti-discrimination authority working under the Ombudswoman, the ministry must take measures to tackle problems faced by both educators and pupils who face discrimination on the grounds of sexual orientation and gender identity. 

The report highlighted the large extent of homophobic bullying in schools, noting that children who experience this form of discrimination often feel isolated and socially excluded, with low self-esteem. International studies show that victims of homophobic bullying end up feeling too afraid to go to school, resulting in lower grades. They often show signs of psychological problems and have suicidal tendencies, said the report. 

In Cyprus, “despite important steps taken, homophobia in schools is a real problem with serious dimensions,” said Savvidou. 

The education system in Cyprus is not familiar with current ideas on issues of sexual orientation and gender identity, said Savvidou, adding: “This lack of specialised information contributes to consolidating distorted views and prejudices and creates, feeds and reproduces in a disguised or open manner a homophobic climate characterised mainly by intolerance.”  

Instances where either educators or pupils are found to be either lesbian, gay, bisexual or transgendered (LGBT) are treated with embarrassment and/or concealment, said the report. 

Sex was introduced in health education lessons in the second and third years of lower secondary school as a part of education reform implemented in 2011-2012. However, many educators try to avoid raising the matter in classes in the second year, leaving it to the third year of gymnasium or sometimes leaving it out completely from the syllabus. 

The introduction of the topic of sex in health education is a positive step, said Savvidou. 

However, she proposed sex education should avoid stereotypical approaches to gender, based instead on providing objective information that help to knock down myths and prejudices. 

Education material should promote respect of difference and create a culture of tolerance with regards to sexual orientation and gender identity. 

Studies show educators are unable or unwilling to discuss issues related to LGBT persons. Educators need continuous support and training so they feel comfortable discussing these issues without adopting stereotypical approaches. This way they can approach in a more specialised way young people who are either responsible for homophobic bullying or victims of it, said Savvidou. 

She further proposed the education ministry create a policy against bullying, which includes in its definition discrimination on the grounds of sexual orientation and gender identity. 

To ensure the effectiveness of this policy, the ministry needs to incorporate educators, parents and pupils in the handling of homophobic bullying, helping to provide a safe environment for pupils who can attend schools with dignity and respect. Discrimination and bullying must not be tolerated.

By dealing with homophobic bullying specifically, the ministry will show commitment to tackling the problem. Recording incidents of homophobic bullying is the first step, said the ombudswoman, noting that schools need to make the reporting of such incidents by educators and pupils easier.  

Schools also need to provide a support infrastructure and counselling for both people who are victims of such homophobic behaviour, as well as those who are responsible for it. 

The ombudswoman’s report was based on the results of a study in Cyprus on homophobic bullying in schools, the results of which were revealed on October 6, 2012. 

The study confirmed from the perspective of educators that bullying on the grounds of sexual orientation or gender was a frequent phenomenon in schools, and was expressed in speech, perceptions and the behaviour of pupils and educators.  

The social exclusion and derision of children who differ from the social gender stereotypes is an existing phenomenon, concluded the study, which noted that often the fear was expressed that showing tolerance to different sexual orientation would cause an increase of non-heterosexuals in schools. 

Educators also suffered discrimination, by and large preferring not to reveal their sexual orientation in the workplace.

ATTORNEY-general Petros Clerides yesterday did an about-turn over a disagreement with international lenders in interpreting a provision that changes the way civil service pensions are calculated as part of the island’s bailout. 

The difference was whether the new system would be retroactive or if it would only affect earnings after January 1, 2013 when it comes into force.

During a discussion at the House Finance Committee on Monday, Clerides appeared certain that it was the latter that had been agreed.

The committee asked the government to clarify the matter before tomorrow when the draft legislation will be put to the vote.

Yesterday however, Clerides sent the committee an urgent letter informing them there was no need to clarify the matter with the troika.

Clerides said certain documents had come to his attention “for the first time” in which the troika clearly interpreted the provision as being retroactive.

“And that the matter was considered closed for the troika,” the attorney-general said. 

The memorandum, on which the two sides have agreed in principle, states: “pension benefits will be calculated on a pro-rata basis taking into account life-time service as of January 2013.”

On Monday, Clerides said that his understanding was that pension rights until December 12, 2012 were secure and that the new method would kick in after January 1 of the new year.

Under the current system, a civil servant’s pension is calculated on the basis of their last salary.

“You realise that in light of this development, which I repeat, I did not know about, any new communication with the troika not only would be pointless, but it could, maybe rightly, cause reaction,” Clerides said in his letter.

He added that irrespective of which interpretation was correct, “I think the matter should be considered closed” since any extension in the negotiations would be damaging.

“Thus, in my view, it is advisable that the bill is approved without further delay,” Clerides said.

CYPRUS appears to be at high risk of fiscal stress in the short-term and also faces high sustainability risks in the medium and long run, according to a European Commission report released yesterday.

The Fiscal Sustainability Report 2012 report said Cyprus should focus on “resolutely continuing to implement sustainability-enhancing measures that avert potential risks to fiscal sustainability from materialising or intensifying in the short-term.”

According to the report, which covers the 24 EU nations not in full bailout programmes, short-term “risks for fiscal stress have abated in nearly all countries” since a previous sustainability report in 2009. 

While the 2009 report indicated that almost two-thirds of EU nations had “elevated risks of fiscal stress for 2010,” yesterday’s report said only Spain and Cyprus “appear to be still at risk” in the short term.

The report said the Cypriot state must also work on further containing the growth of age-related expenditure through pension reform to contribute to the sustainability of public finances in the long-term.

Under a no-policy-change assumption, debt would increase from 102.7 per cent of GDP in 2014 to 127.4 per cent in 2020 and to 171.8 per cent in 2030, the report said.

“Efforts should therefore be made in order to ensure that the debt ratio is put on a long-term downward path,” the report said.

The island must implement long-term sustainability enhancing policies equivalent to a permanent improvement of 8.2 percentage points of GDP – an effort, which is substantially above the average improvement required for the EU as a whole (2.7pp), thus reflecting the significant ageing-cost component.

HUNDREDS of workers at Orphanides Supermarkets took to the streets yesterday asking for their jobs to be saved as a cloud of uncertainty hung over the future of the debt-ridden company.

The employees came out shortly after news that the company’s two main creditors – Popular and Bank of Cyprus – had rejected the appointment of Andreas Andronikou as administrator. Fears were compounded when on Monday the chain shut down 11 stores and sent home on unpaid leave 200 employees.

Last week the chain announced it was going into administration. The company owes banks some €140m or €150m, €85m to suppliers and €10m to other creditors.

Yesterday’s demonstrations were all peaceful. Holding placards, hundreds of Orphanides employees gathered at a distance outside the parliament building, cordoned off by the police. A delegation was then allowed inside, handing over a memo with their demands to House officials.

The employees want the banks to make up their minds and agree to a formula that would keep the company afloat.

The company’s demise would impact the livelihood of some 1200 employees of the supermarket chain; in addition, around 2,000 more people would be affected on the supply end – such as merchants, packers and drivers.

The demonstrators next headed off to the ministries of Labour and Finance. Earlier in the day, a delegation of the employees had met with top brass at Popular Bank headquarters.

Although the creditors have turned down the administrator named by the company, Popular Bank yesterday reassured employees that it was considering other scenarios to salvage the chain.

One option, as reported in the media, would be for the suppliers to set up a new company that would acquire Orphanides’ commercial operations. The suppliers would become shareholders in the company, and would rent the stores that remained in operation. The stores not operating would pass into the possession of the banks and would be sold.

The chain’s real estate is said to be worth around €340 million.

The company’s founder Christos Orphanides yesterday blamed the banks for the continuing uncertainty, saying that it was inconceivable for a company with hundreds of millions in assets to be allowed to go under.

Last week Orphanides took full responsibility for the state of the company, but then in the same breath took a swipe at suppliers, accusing them of putting the squeeze on the chain.

LAWMAKERS yesterday discussed the 2013 budget incorporating the terms agreed between Cyprus and its international lenders, which most deputies said they will vote for despite their reluctance. 

The state’s debt in 2013 is expected to come to 92 per cent of the gross domestic product (GDP) or about €16 billion, the head of parliament’s finance committee Nicolas Papadopoulos said yesterday.

GDP is expected to be reduced from €17.9 billion in 2012 to €17.5 billion in 2013, he added.

“In real numbers, the public debt for 2013 is expected to be increased by €770 million reaching €16 billion compared to the €15.3 billion estimated for 2012,” Papadopoulos said. 

For 2012, the state debt is set to be 85.8 per cent of GDP including the recapitalisation needs of the Popular Bank whose request for state support forced the government to request a bailout from its EU and IMF partners.

Without the needs of the Popular Bank – now state-controlled – the state debt comes to 75.7 per cent of the GDP, Papadopoulos said. 

“We’ve let this crisis expand and grow and here we are now having to ask help from our partners,” said the head of DISY and presidential candidate, Nicos Anastasiades. 

“We need to transmit a message of collective action and joint responsibility. After all, we know very well that voting the budget is a prerequisite to the completion of our lending agreement,” he added. 

DIKO’s head Marios Garoyan said that they were faced with a “very harsh dilemma”. 

“Either accept the terms of our lending agreement and the onerous and unfair measures or else let our country and economy default,” 

 “We stand by our disagreement with the government’s handling of finances, for the inadequate negotiation with the [international lenders] which does not create any prospects for development that would have driven the island’s real economy,” EDEK’s George Varnavas said. 

He added that EDEK would nonetheless vote in favour for the budget because it must support the government in hard times.

Although the European party has not previously voted in favour of the current administration’s budget, its head Demetris Syllouris said yesterday he would vote in favour, “but not because I approve of [the government’s] financial policy”.

Since the House has already approved tax hikes and salary cuts as austerity measures taken vis-a-vis an EU/IMF bailout, voting against the 2013 budget would be just a “cheap PR stunt,” Syllouris said. 

“Voting in favour of the budget is not a statement in support of this financial policy,” he added.

“We are full of rage and anger,” the Green Party’s George Perdikis said. 

“We are angry because you have brought an era of poverty and misery, because it looks like you are leading us to an era when debt rules, and because we suspect that despite blaming each other, no one will be punished for the biggest crime against our people since [the Turkish invasion of] 1974,” Perdikis said. 

The head of ruling party AKEL, Andros Kyprianou, said that though they were not happy about having to agree to the bailout terms, the government had nonetheless secured milder terms. 

State spending is expected to reach €9.5 billion in 2013, of which €2.6 billion will go to paying civil servants, a reduction of 5.3 per cent compared to this year. Social benefits’ spending will be reduced to €963 million from €1.1 billion, and the budget for development has been reduced to €802 million versus €1.0 billion in 2012.

State revenue (without any loans) is expected to come to €7.6 billion Papadopoulos said. 

The deficit in 2012 is expected to come to 5.75 per cent of GDP, he added.  The four-year austerity programme is designed to generate savings of €1.3 billion.

Legislators are due to vote on the budget this evening.

THE FINANCE ministry said yesterday it has secured the necessary cash to cover its current financing needs and there was no possibility of a default, a day after a high-ranking official warned that without loans from semi-government companies (SGOs), the state would run out of money in a matter of days.

Speaking before the House Finance Committee on Monday, finance ministry permanent secretary Christos Patsalides warned that Cyprus could be considered as being in selective default if SGOs refused to provide the necessary cash to cover its immediate needs.

The cash would come from pension funds and workers had expressed concerns it would be lost.

Telecommunications company CyTA said it would put up €100 million on condition that other SGOs – namely the electricity company (EAC) also chipped in.

The EAC resisted until Patsalides told them that the state would default without the cash and would inevitably drag SGOs under as well.

Late on Monday, the EAC agreed to lend the government €100 million.

The ports authority put up another €38 million.

The money will be mainly used to pay civil servants’ salaries – December and 13th.

The cash-strapped state has come to a preliminary agreement with international lenders but it is not yet clear when it will be finalised for the first tranche to be released.

THE QUESTION ‘what would happen had the state defaulted on civil servants’ 12th and 13th salaries’ has elicited mixed reactions, reminiscent of the speculation on the (supposed) Mayan prediction for December 21, 2012: some declare it would have brought about the apocalypse, others say “bah, humbug!”

“The consequences would be quite severe,” offers Theodore Panayotou, director of the Cyprus International Institute of Management.

“For one thing, civil servants would have lowered their productivity – there’s no doubt in my mind about that. Also, Cyprus would risk losing any credibility it has abroad: if the state is unable to pay its own employees, then what sort of message does that send?”

And defaulting on public-sector wages could have triggered a “run on the government, much like a run on the banks,” Panayotou added: “Everyone who has a contract with the government– hoteliers etc. – would demand their money back.”

Faced with the prospect of not being able to pay civil servants’ 12th and 13th salaries this month, the cash-strapped government used the carrot-and-stick approach to borrow internally some €238 million from semi-governmental organisations. The Cyprus Telecommunications Authority lent the government €100m, the Electricity Authority another €100m and the Ports Authority €38m.

This cash, plus around €200m in expected revenues from taxation in coming months, would keep the central government afloat until February, officials said.

But, says Panayotou, how much tax the government can levy in January and February will determine whether the cash runs out, in which case the administration could once again ‘raid’ the pension funds of SGOs.

And January and February are not strong on tax revenues, since post-Christmas season consumption tends to dip, the analyst added.

The short-term loan from the SGOs will be repaid within three months, at an interest rate of 5.5 per cent.

“That’s as good a deal as you can get anywhere, yet the SGOs put up a fight. Still, to be fair, if you were the SGOs would you trust the government to pay you back?”

Civil servants without money in their pockets would also have hit the retail trade hard.  It would have been the final nail in the coffin for many shops and businesses on the brink of going bust that were counting on the Christmas spending spree.

But the million-dollar question, according to Panayotou, is why it had to come to this, “hanging by a pinhead, as it were.”

Economist Symeon Matsis agrees: “It’s the government’s fault for not taking corrective action beforehand, despite warnings that public finances were faltering. Instead, officials had been reassuring everyone that the state could meet its obligations. And then a few days ago, they drop a bomb, saying the government has run out of cash.

“It was yet another example of lack of transparency on the part of the government, bolstering the feeling that they have no plan…it’s day by day,” Matsis said.

And he went a step beyond Panayotou, predicting that a stoppage in salary payments would have led to a complete collapse of the economy:

“It would signal that the government cannot collect adequate revenues. Rating agencies were abuzz on news that Cyprus might not be able to pay its civil servants.”

Economic analyst Dr. Stelios Platis isn’t sold on the doomsday scenarios.

“So what if civil servants didn’t get paid for December? It would have meant absolutely nothing,” he insists.

According to Platis, if push came to shove, the government could simply pass (or at least try to pass) a special law suspending the payment of 12th and/or 13th salaries.

“The state has many mechanisms at its disposal for delayed payments,” he added. “I think a lot of fuss has been made here. Now, were the state to default on other obligations, such as to creditors, that would have been big, yes.”

Failing a law temporarily suspending the payment of salaries, the government might have the option of asking international lenders for a bridge loan – an advance on a bailout loan.

Asked how realistic this was, given that Cyprus has yet to put its signature on a bailout deal, Platis said: “I think the troika would go for it, especially after we passed all these austerity measures, which demonstrated goodwill on our part.

“Granted, asking for a bridge loan would have been weird, particularly after [finance minister] Vassos Shiarly had just assured his counterparts at the Eurogroup that Cyprus can cover its obligations.”

THE BANKS now hold the future of the Orphanides Supermarket chain in their hands, but there does not appear much they could do to save the public company which has debts in the region of €250 million. There is no doubt the banks will want to save the company in order to recoup their money – they are owed €150 million - but the numbers do not add up. 

In this economic climate the company, which posted losses of €17 million in the first nine months of 2012 would not even be able to repay the annual interest rate on its bank loans, let alone start repaying its suppliers to whom it owes €85 million. The funny thing is that the company is using its unsustainable position to put additional pressure on the banks, telling them that if they do not help, with more credit, they will lose all their money.

The banks, Laiki and Bank of Cyprus, have only themselves to blame for extending credit to the company long after it made no business sense to do so. 

The loans may have been secured to some extent, but in effect the banks were keeping afloat a business that had become unviable in the mistaken belief that they were protecting the rest of their loans. This unorthodox banking practice, whereby a bank lends money based on the collateral rather than the viability of the business, is the main reason Cypriot banks are lumbered with so many non-performing loans. 

It is also bad economics because resources that could have been made available to new businesses or healthy companies for expansion were being used to keep a badly-managed, failing business alive. This was a textbook case of mismanagement of resources and of preventing the market from resolving the problem. In their defence, the banks could argue that they were protecting Orphanides’ suppliers, who were also bank customers, some at risk of going under with the chain if it went bankrupt. All this achieved was to delay the inevitable. 

Now the company is so deep into debt that there does not seem to be any salvation. Ten of the company’s shops closed down on Monday and some 250 workers were sent home on unpaid leave. These workers were outside the legislature protesting about their treatment yesterday, but the sad thing is that nobody can help them. Nobody will be able to help the rest of the company’s workers either if the chain closes down. It would be a great shame as the  workers, in contrast with the company’s banks and suppliers, did nothing wrong.

AFTER a night of rain almost islandwide, which continued into much of yesterday causing countless problems to homes, shops and drivers, the met office says there will be little let up until Friday, and that will be brief.

Shopkeepers, already hit by recession, are angry at being fed the same old lines year after year when it rains, as they spent another morning yesterday clearing mud from their damaged premises.

Fire services received 16 distress calls yesterday morning, six in  Limassol, five in Larnaca, three in Nicosia and two in Paphos involving flooded basements, and drivers stuck in their cars in flooded streets.

And there’s more to come in next few days.

Just over two weeks into the month, the amount of rain which has fallen so far has already surpassed the average total in any given December. “From the last 112 Decembers, this one ranks as 46th,” said meteorological officer Marios Theofilou.

He said Cyprus could expect more of the same until Friday when the weather will be fine but the weekend would bring more rain, he said.

Police have asked the public to be cautious, maintain a safe distance while driving and keep their lights on at all times. A number of roads in mountainous areas now pose a safety risk from potential landslides and fog, police said.

This includes roads from Alassa to Platres, Trimiklinis – Amiantos – Karvouna, and Yerasas – Kalo Chorio – Zoopiyis – Agros and roads to and from Kakopetria village.

One driver in Paphos was almost swept away by a torrent, as a river between Nata and Choletra swelled. He managed to get out of the car and reach the riverbank before the flood carried his car towards the Asprokremmos reservoir. Authorities have closed the road. 

Roads and local shops in Paphos’ Latchi flooded from heavy rain, which began Monday night when a river flowing from the areas of Droushia and Androlykou overflowed, rising above a small bridge at the entrance of Latchi. Houses also flooded in neighbouring Polis Chrysochous, police said.

Local shopkeepers said that they are flooded wherever it rains and blamed the authorities for consistently failing to take precautionary measures to remove part of the bridge’s structure that stops the river from flowing. 

The structure was added as part of a path for cyclists and pedestrians, Polis Chrysochous mayor Angelos Odysseos said, blaming the state for failing to heed his requests to have it removed. The municipality hired a digger to clear debris off the riverbed, Odysseos said. 

“We told [the municipality] last year but they said they have no money,” a shopkeeper said.  “Let them quit here and now!” another woman said. “What have they been waiting for? Should people die for them to do something?” 

Odysseos blamed the public works’ department for a shoddy job though deputy mayor Yiotis Papachristofis told the Cyprus News agency (CNA) that the local council allegedly ignored a number of warnings. 

“Despite our numerous questions to the mayor and assurances that the next winter would not bring about this problem, the problem unfortunately remains,” Papachristofis said.

In Limassol, residents of the Trachoni community got stuck in cars when the entrance to the area got flooded for the second time this year. 

Fire services have been pumping the water to the community’s artificial lake which is however close to overfilling. “What will happen with more rain?” community leader Kyriacos Christodoulou asked. 

Christodoulou said that the necessary infrastructure works were never done because of costs.

“We ask the relevant departments to find an immediate solution to this problem.” Christodoulou said. 

But in the meantime, Limassol mayor Andreas Christou yesterday announced that sewerage works in the Limassol areas of Tsirio and Ayia Fyla, areas that experienced two bouts of flooding ten days ago over one weekend, are due to start this year after the cabinet approved the budget. The works are expected to resolve the situation, Christou said.

In just one day, the reservoir at Argaka in Paphos, which was 74.4 full yesterday morning overflowed by evening. It is the first reservoir to overflow this winter.  The dam has a capacity of 990,000 cubic metres. The smaller dam in Kalopanayiotis that holds 363,000 cubic metres is already full while almost all others are over 50 per cent full, with the biggest, the Kouris, Asprokremmos and Evretou dams edging close to full capacity.

The Pomos dam that can hold 860,000 cubic metres and was at 75.6 per cent capacity as of yesterday morning is expected to overflow today, the water development’s department Vassos Socratous told CNA.

Socratous said that all reservoirs in Paphos and the rest of Cyprus were likely to overflow again this year.

And it looks like Cyprus could be having a white Christmas in the mountains. The met office has promised snow today and tomorrow.

The only good news yesterday was the overflowing of the Argaka dam in Paphos

TWO MEN were arrested by the Drugs Squad (YKAN) in the Nicosia district yesterday in connection with the possession of drugs, pistols and bullets but not before police gave simultaneous car chases, firing warning shots until the two suspects stopped their cars.  

According to state broadcaster CyBC, following searches of the cars and other properties belonging to the suspects, police found in total around 20kg of cannabis and 3kg of cocaine, along with two loaded pistols and bullets.

Two Greek Cypriots aged 27 and 34 were arrested, while another two are wanted on suspicion of being part of a drugs gang operating in Cyprus.  

Acting on a tip-off, the Drugs Squad set up surveillance of a car in Kornos in the Nicosia District yesterday. At around midday, the 27-year-old went to pick up the car. Police gave chase to the village of Alambra until the suspect finally stopped after warning shots were fired.  

YKAN spokesman Sergios Sergides said a large quantity of drugs was found in the car, along with a loaded pistol and bullets of various sizes. 

Meanwhile, another YKAN team went to search the home of the 34-year-old suspect in Ayia Varvara. On seeing the police, he allegedly threw a sports bag from a window on to the ground and made off in his car. Police again gave chase, firing warning shots until the 34-year-old eventually stopped on the old Nicosia-Limassol road before the village of Mosfiloti. 

According to Sergides, a search of the car revealed a loaded pistol, 85 grams of cocaine and 85 grams of cannabis. 

In the dropped sports bag, police found 2kg of cocaine and 200g of cannabis. A further search of the property of the 34-year-old resulted in the confiscation of a grinder with traces of cannabis and cocaine.  

Meanwhile, in a separate incident, five men were sentenced by the Larnaca district court yesterday after being convicted of importing 21.8kg of cannabis to Cyprus on June 21, 2012. 

According to Larnaca Press Agency, the five men are all Greek Pontians from Greece and Kazakhstan. Four were found in a car by YKAN containing two travel bags with 21.9kg of cannabis. Police found 1.8kg of cannabis in the flat of a fifth. 

The court yesterday dished out sentences ranging from four to eight years for the five.

A MOTHER of two was killed in a road accident yesterday while her 14-month-old daughter who was sitting in the back seat survived the crash with minor injuries. 

Maria Michael Kostea, 34, from Liopetri, was driving on Ayia Varvara Street in Ayia Napa yesterday heading towards the town centre, when at around 11.30am, in circumstances under investigation, she lost control of the car, veered into the opposite lane and smashed into the wall of a house. 

The driver, who was not wearing a seatbelt was seriously injured in the collision while her 14-month old daughter who was sitting in a child seat in the back of the car sustained only minor injuries. 

Kostea was rushed to Famagusta general hospital where she died at 3pm. Her daughter was kept in hospital as a precautionary measure. 

The 34-year-old leaves behind a husband and her two daughters, aged 14-months and six years.

CYPRUS Airways (CY) yesterday thanked the parliament’s finance committee for releasing over €16 million earmarked for a share capital increase, which the ailing airline said would help them get back on their feet. 

“Cyprus Airways would like to publicly express their gratitude over the House finance committee decision…to release €16,330,000, part of the second tranche of the government’s part of the share capital increase,” CY said in an announcement. The tranche is part of some €31.3 million the airline had requested – and has now received – to help make the airline viable.

Last week the airline asked the state for an additional €73 million in order to better implement its new restructuring plan. 

Under the plan, 407  employees would be made redundant, leaving 623 staff who would have to agree to salary cuts to bring wages down to competitive levels, as well introducing working hours that would better suit the airline’s needs. 

The head of the House finance committee, Nicolas Papadopoulos, expressed concern over the new request and raised questions over whether they could secure the consent of their European partners. 

Parliament, however, has also previously expressed concerns over the €31 million it eventually agreed to release. 

During discussions over the summer, lawmakers said they were worried that redundancy plans were too costly because of the compensation due to those who lose their jobs and expressed worries over a previous incarnation of a restructuring plan that the state proposed.

Cash injections in the form of assistance for losses incurred due to a Turkish airspace ban on Cypriot aircraft has been keeping the airline going. 

Last year it was given €20 million for losses incurred between 2004 and 2010 and this year it got €5.3 million, representing the extra fuel cost to avoid Turkish airspace. 

The airline also benefits from bilateral agreements between Cyprus and non-EU member states and is, for example, guaranteed major scheduled routes for most of the year to and from Russia and Cyprus. 

Despite a number of false starts in recent years, CY has been unable to keep up with competition from cheaper carriers and rising fuel costs.

The current plan has been prepared by consultants with Air France-KLM, and was discussed in the House behind closed doors. The airline has said that it wants to start implementation in mid-January next year.

CY yesterday said that “it will do whatever is humanly possible to prove worthy of their chosen duty, to keep Cyprus’ historic airline going, render it competitive so it can grow and become profitable as soon as possible”.

SECONDARY school students were sent home early yesterday as their teachers walked out of classrooms for the day’s last period, protesting the austerity measures that impact their sector.

Teachers will be forced to work for an extra period (40 minutes) a week, a move that will likely see 413 contract teachers out of a job, education minister Giorgos Demosthenous said yesterday.

The measures are among those agreed with Cyprus’ international lenders, the troika, or the EU and IMF, as part of the bailout deal.

 But the secondary school teachers’ union, OELMEK, accused the government of failing to negotiate correctly the terms of the agreement. 

“Bad negotiation will lead our colleagues, some of who have been working for five years even ten, to unemployment,” OELMEK head Demetris Taliadoros said.

OELMEK – which is supported by the primary school teachers’ union POED – has said they were not ruling out stronger measures, but he did not specify what those measures might be. 

The top salary for state primary and secondary school teachers comes to just under €65,000 a year, the second highest top salary in the EU. Newcomers earn €30,000 a year, the fifth highest salary for teachers in the EU.

But OELMEK has said that instead of targeting tax evaders and the wealthy, civil servants were being asked to bear the brunt of the austerity measures.

POED said that in addition to driving people to unemployment, increasing teaching time would “negatively impact the way schools are run, burdening even more educators’ daily schedule and teaching itself”.

Demosthenous said yesterday that protesting was in vain. 

“We have made it clear and I told this to the teachers, that nothing can change in how the terms have been laid out,” he said.

Demosthenous said they would try to reduce the number of those affected and would support those made jobless, but did not say how, save to offer his assurances that the ministry was mulling over possibilities.

Cyprus continues spending a comparatively large proportion of its gross domestic product (GDP) on education which demonstrates the government’s commitment, ruling AKEL deputy Andros Kafkalias said yesterday during parliament’s discussion of the 2013 budget. Following Denmark, which contributes 8.7 per cent of its GDP to education, Cyprus is the second highest spender with 8.0 per cent, according to eurostat’s latest available data.

ALLOWING Orphanides Supermarkets to collapse will impact the economy to the tune of €400 million and have huge consequences across the board, the head of the employers and industrialists federation OEV warned yesterday. 

“Bearing in mind that a very large number of people are employed by the supermarkets and the suppliers who will have very serious problems… indeed there will be very serious consequences on the Cyprus economy in its entirety,” OEV head Michalis Pilikos said.

He placed the loss to the economy in the area of some €400 million. 

The supermarket chain announced last week that it was going into receivership, but the future still looms uncertain as its two main creditors, the Popular Bank and the Bank of Cyprus, which are collectively owed at least €140 million rejected the appointment of an administrator to oversee a restructuring. 

Orphanides owes €85 million to suppliers and €10 million to other creditors, and posted a loss of €17.7 million for the first three quarters of the year.

Some 2,000 drivers and packers work on the supply end while about 1,250 work for Orphanides. 

“A well-meaning effort must be made by all those involved so that Orphanides supermarkets continue operating because the consequences will really be huge,” Pilikos said. 

But he conceded that the banks – primarily the Popular Bank –  which are themselves struggling, needed to ensure that any restructuring plan guaranteed they would get their money back. The chain’s real estate is said to be worth about €340 million. 

Pilikos propounded the suppliers’ proposal of a joint buyout of the company to gradually recoup what they are owed, while reports yesterday said that the Chamber of Commerce and Industry KEVE was in discussions with concerned parties. 

Hundreds of workers at Orphanides supermarkets protested this week asking for their jobs to be saved, as already 200 have been sent home on unpaid leaves after the chain shut down 11 stores that had run out of goods.

According to CEO Christos Orphanides, the company has been having problems for more than a year which became evident when a minority of large contractors stopped supplying the chain.

FIVE board members of the Bank of Cyprus (BoC) have expressed their intention to step down, the bank said yesterday.

The five are: Vasilis Rologis, Costas Severis, Anna Diogenous, Giorgos Georgiades and Christos Mouskis.

Mouskis submitted his resignation on Tuesday, which will be put before a board meeting next Thursday, the BoC said in an announcement.

All five intend to leave in the coming months but before the next annual general meeting, as part of “their endeavour to contribute to the renewal and restructuring of the board and in response to a recommendation from the central bank of Cyprus,” the BoC said.

The central bank has asked the BoC – the island’s biggest lender – to ensure that no board member serves for more than nine years, as part of efforts to improve its corporate affairs and comply with regulations stating that anyone staying on for more than nine years needs to justify it.

All departing directors have served on the BoC board for longer than nine years, the BoC said. The announcement was issued after information about the forthcoming departures leaked to the press.

As part of Cyprus’ memorandum of understanding agreement with its international lenders, authorities need to pass legislation to strengthen checks on the board members of commercial banks. This includes banning lending to independent board members and their connected parties and removing any board members with existing debts to the banks.

THE CABINET yesterday gave its approval to the state borrowing a total of €250 million from three semi-governmental organisations so it can pay wages and pensions in the public sector for the month of December. 

According to government spokesman Stefanos Stefanou, cabinet approved the three loans to be granted by the Electricity Authority of Cyprus (EAC), the Cyprus Telecommunications Authority (CyTA) and the Cyprus Ports Authority. 

The EAC and CyTA will loan the state €100m each from their employees’ pension funds, while the Ports Authority will lend €50m so the government can meet its financing obligations for December, after the finance ministry warned of a selective default in parliament earlier this week.

The Ports Authority had originally offered a €38 million loan with an option for a further €12m which the government eventually took.  

The CyTA and EAC loans are short-term, three month loans at an interest rate of 5.5 per cent which the government said it would pay back once it gets the first tranche of an international bailout, the details of which will be discussed by the Eurogroup on January 21, 2013. 

According to Accountant-general Rea Georgiou, following the loan agreements, the state will now be able to pay December salaries on December 24, on the eve of Christmas, and 13th salaries and pensions on the last day of the month. 

December pensions will be paid this Friday.    

Meanwhile, the finance ministry yesterday announced that Value Added Tax (VAT) would see an increase of 1.0 per cent, from 17 to 18 per cent as of January 14, 2013. 

The increase will not affect those goods and services where a lower rate of VAT is imposed of 5.0 per cent or 8.0 per cent.

PARLIAMENT LAST night voted through the 2013 budget incorporating the terms agreed between Cyprus and its international lenders after marathon speeches made over two days by MPs criticising government policy. 

With 51 votes in favour and two against, the plenum passed the austerity-geared annual budget that will see the state spend some €9.5 billion (without factoring in loans) and earn €7.6 billion. Despite voicing their reluctance, the main parties voted in favour, with only the Greens’ Giorgos Perdikis and EVROKO’s Nicos Koutsou voting against. 

A large number of amendments were proposed by the parties with 27 in total finally adopted. The government also tabled and had approved a further four amendments, including one adding €29m to the 2013 budget, which will go towards paying insurers of the Vassilikos power plant that was destroyed in last year’s Mari naval base blast.  

However, the budget for the Vassilikos insurers, like many other funds in the 2013 budget, was crossed by parliament in yesterday’s session, meaning the House Finance Committee must give its final approval before any of the money can be released. 

Two of the government’s amendments refer to a number of exemptions on the hiring freeze for the Education Ministry.

The fourth government amendment includes the target of a 7.25 per cent fiscal adjustment in the new budget. 

All proposed amendments tabled by DISY and DIKO were approved, as was one tabled by DISY, DIKO and EDEK, as well as three by DISY, DIKO and the Greens, two by DISY and the Greens, and one by EDEK, the Greens, independent MP Zacharias Koulias and Koutsou.  

One DISY-DIKO amendment says that the wage reductions implemented in the state sector should be extended to cover any organisation or institution which gets a state grant covering at least 50 per cent of its budget. 

The amendment will impact upon the Natural Gas Public Company (DEFA), the new state hydrocarbons company (KRETYK), the Institute of Neurology and Genetics, the Bank of Cyprus Oncology Centre, the Cyprus Energy Institute, the Cultural Foundation, the Research Institute and the Cyprus Orchestra.

The second amendment provides that staffing of embassies at the Holy See, Rome, Thessaloniki and Brussels can take place without the prior approval of the House Finance Committee. 

Another amendment puts a stop to special zero-interest loans for the purposes of state officials purchasing cars.

DISY and DIKO also crossed funds on a number of budgets, including: €700,000 on transferring officials to and from abroad; €400,000 for hospitality purposes; €3m for cultural grants; €4m for research grants; and €2.3m in grants to foreign schools. 

A further €64m was crossed for the purchase of shares, including the €1m needed for the share capital of KRETYK, with the rest earmarked for Cyprus’ contribution to the European Support Mechanism.   

A €1.9m budget for the construction of buildings abroad was crossed, as well as €15m for the purchase of medical and other equipment, while €5m earmarked for grants to various semi-government organisations was also crossed. 

In addition, a further €110m was crossed for rent for the National Guard and €1.79m for development projects. 

Funds set aside for social and other benefits for refugees and asylum seekers have also been crossed. 

The amendment tabled by EDEK, Koulias and Koutsou crossing €15m on medical purchases was also approved.

THE CYPRUS problem always slips into the House debate for the budget. There is no reason for it, but the politicians have always been much more comfortable talking about Turkish intransigence and their support of an ideal settlement than about the economy. It is much easier to take a tough, populist line on the national problem than on the economy, which is not often offered for rhetorical flourishes, much less so when discussing an austerity budget.

AKEL chief Andros Kyprianou devoted a big part of his speech on Tuesday to the Cyprus problem, warning that no matter how much growth and affluence we achieved it would not be built on a solid basis, as long as the occupation continued and the danger of partition loomed. While the government was engaged in talks with the troika, he said, the pseudo-state signed an ‘economic protocol’ with Turkey which would pave the way for the takeover of the north by Turkish business. 

The implication was that while the government was negotiating with the troika, which was invited here because of the problems caused by the banks, Turkey was taking more steps to “deepen its economic presence” in the north. Turkey has been deepening its economic presence in the north for the last six to eight years and was not waiting for the troika to arrive to do this. On the plus side, according to Kyprianou, President Christofias’ efforts and initiatives credited the Greek Cypriot side with the “sincere desire for a settlement” and won the positive stance of the international community.

Kyrpianou is satisfied for the Greek Cypriots to win kudos from the international community, while Turkey “deepens its economic presence” in the north and “partition looms”. He even managed to justify some NATO-bashing, in the context of the Cyprus problem. Attacking the DISY chief’s intention to apply for NATO membership if elected, the AKEL boss said “the only thing this would achieve would be for the Cyprus problem to slip from the UN framework to the NATO framework.”

Why would this be such a bad thing? For 40 years, the only thing guaranteed by the UN framework was failure to reach an agreement. With partition looming why is Kyprianou so keen on keeping the peace efforts within the framework that has an impeccable record of failure. Surely putting the problem in a NATO framework – assuming NATO would agree to take it – might provide a bigger chance of averting the partition that Kyprianou and AKEL dread.

But if the problem was solved, what would the politicians talk about during the budget debate?