THE EUROGROUP yesterday pledged to agree a bailout for Cyprus by the end of March, following agreement last night on an “independent evaluation” of the island’s anti money-laundering framework.   

However, the details of how the rescue will be financed and whether a haircut on bank deposits will be imposed have yet to be sorted out, according to Reuters. Nor were any details immediately available on what form the money laundering audit will take. 

Speaking after the meeting of eurozone finance ministers in Brussels, Eurogroup chairman Jeroen Dijsselbloem told a news conference that EU ministers were ready to help Cyprus overhaul its economy, and especially its oversized banking sector.

“We agreed to target a political endorsement of the programme towards the second half of March," Dijsselbloem said, referring to the rescue package, which is set to total up to €17 billion.

Removing one of the stumbling blocks for an agreement, Dijsselbloem said that the new Cypriot authorities had agreed to an independent review of how Cypriot banks are implementing anti money-laundering laws. That is likely to appease Germany, which has raised concerns about money-laundering on the island. No details were given last night on what kind of “independent evaluation” would be undertaken, leaving it unclear as to whether agreement had been reached on private auditors working alone or in collaboration with institutions like the Council of Europe’s Moneyval.  

According to the Cyprus News Agency, when asked whether it would be Moneyval operating in Cyprus under the auspices of the Cyprus Central Bank, Dijsselbloem said he had been at another meeting when that specific decision was taken, but he added that his understanding was the audit would be undertaken by a private company since that was the key sticking point. 

Yesterday was the first Eurogroup meeting for President Nicos Anastasiades’ new government, who was represented by finance minister Michalis Sarris. 

In the build-up to the key meeting, Sarris spoke with a number of foreign news outlets, laying out his negotiating strategy for the bailout.

According to the Wall Street Journal, Sarris said Cyprus was willing to meet the troika halfway on privatisations, downsizing its banking sector and auditing its anti money-laundering framework but in return wanted a clear commitment that there would be no ‘bail-in’ of bank depositors. This option of forcing losses on large deposit holders in Cypriot banks and senior bondholders has been doing the rounds recently, mostly in the German press. 

Figures released last week showed a little over 2 percent of Cyprus’ total deposits was withdrawn in January, although officials say there has since been a return of capital.

Sarris warned that creditor haircuts, which he has described as a “foolish” idea, would “strike a fundamental blow” to Cyprus’ services economy, making repayment of any loan harder while setting a damaging precedent.  

The Financial Times (FT) yesterday reported that Cyprus needs around €16.7 bn to meet the state’s financing needs and recapitalise its banks, which would increase the country’s debt to 145 per cent of national income by 2014. 

The draft memorandum agreed between the previous government and the troika includes a provision demanding a look at privatisations should Cyprus’ debt prove unsustainable. 

Sarris told the FT ahead of yesterday’s Eurogroup meeting that he wants to push for more flexible terms on privatisations to avoid pressure for a quick sale at lower prices that would increase unemployment. 

Instead of rushing to privatise within a fixed number of years, the Cypriot minister argued that privatisations could be implemented “when the conditions are right”.

Regarding German pressure to send in private auditors to check Cypriot banks’ implementation of anti money-laundering laws, Sarris said he would counter-propose a compromise deal where the audit would be led by Moneyval, the Council of Europe’s anti money-laundering agency, but include “mutually agreed experts” from outside. 

“It responds to those who want to take a more careful look but at the same time not doing it in a way that could cause chaos,” Sarris told the FT.

However, it appears that the eurozone ministers yesterday examined a variety of options to finance the bailout and ensure that it is “sustainable” - that Cyprus can repay what it borrows - without reaching any conclusion other than a commitment to reach a deal by the end of March. 

When asked if bank depositors were safe, Dijsselbloem, who chairs the meetings of the finance ministers, avoided a direct answer.

He said the details of the bailout would have to be worked out together by the International Monetary Fund, the European Central Bank and the European Commission (troika).

“All the ... elements will have to be decided as soon as the institutions come back with a solution which is cooperative in reaching a feasible and sustainable solution to Cyprus, so all the questions of the elements will then be answered,” he said.

Meanwhile, in a released statement, the eurozone’s finance ministers said: “With the new government now in place in Cyprus, the Eurogroup is confident that a swift conclusion of the negotiations towards a Memorandum of Understanding can be reached.” 

This in itself ends a dispute over whether Cyprus is important enough for the eurozone to come to its rescue - a debate started by Germany, which had said the “systemic relevance” of Cyprus was unproven.

The Eurogroup described its first exchanges with the new Cypriot government in the statement as “useful” and welcomed Anastasiades’ commitment “to closely cooperate with Cyprus’ European partners towards the earliest possible completion of the loan agreement”.

It also noted that it “has been informed that…the new government has agreed on an independent evaluation of the implementation of the anti money-laundering framework in Cypriot financial institutions”.

Regarding privatisations, there was no word from Brussels last night as to whether Sarris was able to convince his counterparts on a more “flexible” approach. 

The troika are sending a mission of experts to Cyprus today for a technical analysis of the country's financing needs and to get a better understanding of the new Cypriot government, ECB board member Joerg Asmussen said.

According to state broadcaster CyBC, other troika representatives were already on the island yesterday holding meetings with the top management of seven semi-government organisations (SGOs): telecoms company CyTA, the Electricity Authority (EAC), the Cyprus Ports Authority, State Fairs Authority, CyBC, the Cyprus Stock Exchange, and the Land Development Corporation. 

The troika officials will continue meetings with SGOs today.

Dutch Finance Minister and Eurogroup Chairman Jeroen Dijsselbloem, left, with International Monetary Fund Managing Director Christine Lagarde and Belgium's Finance Minister Steven Vanackere

FOREIGN Minister Ioannis Kasoulides met his Greek counterpart Demetris Avramopoulos yesterday in Athens, with the Cyprus problem, the economy and Cyprus’ application for membership to NATO’s Partnership for Peace (PfP) the main talking points. 

Kasoulides was also in the Greek capital yesterday to prepare the ground for President Nicos Anastasiades’ visit on Monday.

Avramopoulos thanked Kasoulides for his first trip to Athens since being named foreign minister, labelling the visit a symbolic gesture. The Greek minister stressed that the Cyprus problem is the foundation of Greek foreign policy and that Greece fully supports Cyprus’ application for membership to the PfP. 

Avramopoulos said that a solution to the Cyprus problem is a prerequisite if Greece and Turkey are to have a positive relationship and stated his support for a solution which will end the occupation and settlement and will be based on UN resolutions.

Speaking about the economy, the Greek foreign minister said that Cyprus and Greece will go into battle together and added that the new Cyprus government under Anastasiades has a planned strategy and knows what it wants.

Commenting on the economy, Kasoulides said the two countries are being tested by the crisis and that a two-year co-operative agreement had been put in place with Greece. He also stated that Greece is not responsible for the choices made by the banks in Cyprus to purchase Greek bonds and that such views should not be held.

Kasoulides expressed the Cyprus government’s readiness to begin talks on the Cyprus problem, aiming at a solution and not dialogue just for the sake of it.

BUILDING a costly liquefied natural gas (LNG) terminal is the only way for Cyprus to export its hydrocarbons, said head of Cyprus’ state hydrocarbons company (KRETYK) Charalambos Ellinas yesterday. 

Speaking to state broadcaster CyBC, Ellinas argued in favour of an LNG terminal saying that it was the best and only option available to the country.   

The KRETYK head said the state hydrocarbons company was preparing an action plan to submit to the new commerce minister in the coming days. The plan lays out positions on pending issues relating to the company’s own existence, the debate over an LNG terminal, Noble Energy’s pending exploitation of the Aphrodite field in block 12 of Cyprus’ Exclusive Economic Zone (EEZ), as well as discussions with French giant TOTAL and Italian-Korean consortium ENI/KOGAS, who were granted exploration licences for five blocks in total.  

Ellinas also referred to the need to start promoting Cyprus’ estimated natural gas reserves to Europe and elsewhere, “something which we haven’t done until now”. 

KRETYK officials will be travelling to Milan next week for talks with ENI which has licences for blocks 10 and 11, while TOTAL will arrive in Cyprus the week after for talks on its licences for blocks 2, 3 and 9 within Cyprus’ EEZ.  

According to Ellinas, both ENI and TOTAL are keen to get started on exploratory drilling as soon as possible. 

Former commerce minister Neoclis Sylikiotis told reporters last month that TOTAL was expected to begin drilling next year. 

Regarding the option of building a costly LNG plant to liquefy gas from Cyprus’ EEZ and possibly others, and then export it overseas, Ellinas said a decision has to be taken. 

He argued that a lot of focus regarding this issue has been on whether the estimated 7 trillion cubic feet of gas in Cyprus’ block 12 is enough to make a terminal viable. 

“What we’re saying is we have another five blocks,” said Ellinas, adding that by the time gas from block 12 goes to the LNG terminal, gas reserves from Cyprus' other five blocks will also come a year later. 

“The terminal is not only for the Aphrodite field but all these other (blocks) as well, and not only is it viable, it is the only way to export natural gas,” he said, adding that Cyprus will likely find five times the quantity of gas it has found so far once exploratory drilling is completed on the other five blocks.  

The KRETYK head dismissed the option of building a pipeline to Turkey instead, arguing there were many obstacles preventing that option.  

“The terminal is the only way. We want the freedom to export to markets,” he said.

UN SPECIAL Advisor Alexander Downer was in Cyprus yesterday to prepare the ground ahead of next week’s meetings with the two leaders, where he hopes to clear a path towards the restart of peace talks following last month’s presidential election. 

The Australian made a one-day stopover in Cyprus to chat with the UN Good Offices staff about the scheduled meetings for which he will return to the island.  

Downer will meet with both President Nicos Anastasiades - for the first time since the latter took office - and Turkish Cypriot leader Dervis Eroglu on Tuesday.  

With Greco-Turkish ties evidently warming following the high-level talks between the two countries in Istanbul earlier this week, all eyes will be on Anastasiades now to ascertain his thoughts and positions on how the peace process can move forward.

However, with Cyprus battling to stave off bankruptcy and convince its eurozone partners that it deserves to stay afloat, it seems unlikely the new president has put the island’s ongoing division first on his list of things to do since taking over the Presidential Palace. 

According to sources, Anasastiades did not give away too much during the election campaign on his intentions regarding the Cyprus problem. 

Will he like to start with some confidence-building measures? Does he want to begin direct talks or will he appoint a representative to begin low-level talks? 

Downer will attempt to measure his pulse at next Tuesday’s meeting and assess the possibility of arranging a first ‘meet and greet’ of the two leaders since Anastasiades’ election before heading to New York to brief the UN Secretary-general. 

Talks between Eroglu and former president Demetris Christofias ground to a halt before last summer, on the pretence that the Turkish Cypriot side refused to engage in direct talks while Cyprus held the EU presidency.  

Following Anastasiades’ election, the response from Turkey has been somewhat upbeat. 

Ankara Anatolia news agency reported on Tuesday that Turkish Foreign Minister Ahmet Davutoglu described Anastasiades’ victory as a psychological advantage in the peace process, recalling that the new leader had voted ‘yes’ in the 2004 Annan plan referendum. 

He added that Turkey would be monitoring and assessing Anastasiades’ steps in relation to the frozen peace process. 

During the joint press conference between Turkish Prime Minister Tayyip Erdogan and Greek PM Antonis Samaras in Istanbul on Monday, Erdogan expressed a willingness on the part of the two NATO countries to overcome the difficulties and bury the Cyprus problem in history.  

“I believe that we, in our country and Samaras' administration, which has a strong will for a solution, will take steps, and I hope that we will achieve important results for the stability, peace and security of the region,” Erdogan said.

The Turkish leadership has long portrayed the Cyprus problem as one involving two communities and two ‘motherlands’, the prevailing argument being that Greece has not done enough to ‘guide’ Greek Cypriot public opinion towards a settlement the way Turkey has with the Turkish Cypriots.  

For his part, Samaras said that the Cyprus problem should be solved in line with the relevant UN Security Council resolutions, noting that a fair solution would benefit the whole region and open Turkey’s path to the EU. 

According to Turkish Cypriot reports, Eroglu sent a letter to Anastasiades on the day he took office to congratulate him on his election and request a meeting the soonest possible to determine a road map for the Cyprus talks.  

Eroglu has made numerous public statements setting the imposition of a timeframe as a precondition to the restart of talks. He effectively argues for talks to last until his term in office comes to an end in 2015. His position is that if the two leaders fail to reach agreement by then, the north should be upgraded and afforded international recognition.   

Given that such a formula would be tantamount to inviting the Turkish Cypriot leader to draw out the talks and gain recognition for the pariah entity, it is highly unlikely Anastasiades, the international community or even Turkey will push hard on this.  

Meanwhile, Eroglu has been fighting his own battle for survival and relevance both within the breakaway regime and with the Turkish leadership. 

Turkey’s ruling Justice and Development Party (AKP) has shown a clear preference for Turkish Cypriot ‘Prime Minister’ Irsen Kucuk over ‘President’ Eroglu, and played an active role in getting Kucuk re-elected head of Eroglu’s National Unity Party (UBP). 

Reports suggest Kucuk is more amenable to Ankara’s persuasion than the septuagenarian Turkish Cypriot leader. 

If Erdogan and Samaras are ready to play ball, as one diplomatic source suggested, the pressure would then be on Anastasiades to see whether he was ready to take part. 

FORMER foreign minister Marcos Kyprianou said yesterday that he had been assured that it was safe for Cyprus to keep the Iranian munitions cargo that was confiscated and stored at a naval base in Mari before the containers exploded in July 2011.

Kyprianou - one of six defendants in the ongoing trial over the death of 13 people who were killed by the blast - was being cross-examined by the state prosecution.

Kyprianou said that soon after Cyprus seized the munitions in early 2009 from the Cypriot-flagged Monchegorsk that was going from Iran to Syria, in violation of a UN security council resolutions, Colonel Georgios Georgiades was “reassuring” about the safety aspects of keeping the cargo in Cyprus, mentioning only that four of the 98 containers were “somewhat dangerous”. 

Georgiades “was reassuring that the cargo was not dangerous. I remember very well that he said gunpowder burns but does not explode, and he never said there was any danger or problem and we should do something,” Kyprianou told the court. 

Georgiades has testified in the trial as a prosecution witness.

Kyprianou denied the prosecution’s suggestion that he was trying to blame the army and Georgiades of failing to take safety precautions, saying that while keeping the cargo in Cyprus was a political decision, things could have changed if the situation had been presented differently to him. 

By August 2009, Kyprianou’s instructions were to hold on to the cargo and maintain the status quo due to the upcoming meetings between President Demetris Christofias and Syria’s Bashir al-Assad, Kyprianou said. 

He also denied acting on his own accord without permission by then president Demetris Christofias. 

“You are trying to get the president of Republic out of the picture for your own reasons. I was only relaying the position of the chief of state with whom I agreed,” Kyprianou told the prosecution.

Kyprianou also denied giving a timeframe for holding on to the cargo, or for having any reason to recommend the cargo’s destruction. 

“There was never an issue of keeping the cargo for a short amount of time. Temporary storage meant indefinite (storage) i.e. until the political situation requiring the confiscation and storage of the cargo in Cyprus changed,” Kyprianou said. 

Seven sailors and six fire fighters were killed in the munitions’ explosion.

The trial’s defendants are Kyprianou, former defence minister Costas Papacostas, former national guard deputy chief Savvas Argyrou, former fire service chief Andreas Nicolaou; deputy fire chief Charalambos Charalambous; and former disaster response squad (EMAK) commander Andreas Loizides. They are charged with causing death by want of precaution, and homicide by gross negligence in relation to the deaths of the 13 people.

FORMER Eurogroup president and Prime Minister of Luxembourg Jean-Claude Juncker has said that Cyprus’ financial problems should be addressed with the same care demonstrated in the case of Greece, Ireland and Portugal and expressed the view that a decision on Cyprus must be taken soon.

Juncker considers the case of Cyprus as a systemic one.

In an interview with the international press agency Agence Europe, published in Brussels, former Eurogroup president noted that “if a country like Cyprus, as small as it is, faces unresolved problems, then these problems should be addressed with the same care the Greek, Irish and Portuguese problems were addressed”.

He added that if a member of the eurozone has problems similar to those faced by Cyprus with regard to their type, nature and scale, then it should be considered as a systemic case.

Juncker said that undoubtedly the Greek haircut did not have a positive impact on Cyprus, pointing out that everyone should remember this. 

“It would be better if we had not fallen into this solution with open arms and eyes closed,” he said.

A WORLD War II veteran and pensioner handed his €500 monthly pension over to Omonia Football Club yesterday, in a bid to help his beloved team collect €5 million in order to meet UEFA Financial Fair Play (FFP) regulations. 

Omonia president, Stelios Mylonas, came out yesterday to confirm rumours that the club, which is a total of €17 million in debt, needs to collect €5 million by March 31 or risk sanctions from UEFA for not meeting the FFP regulations over clubs getting into excessive debt.

UEFA has set up an independent panel, the Club Financial Control Board (CFCB) to assess if clubs have broken the FFP rules. Between December 2013 and April 2014 the CFCB will advise clubs of the outcome of their assessment and any punishments. The most serious punishment would be a ban from UEFA competition.

In his letter to the club which accompanied his pension, the veteran who wished to remain anonymous, wrote that he was giving his monthly income in the hope other Omonia supporters would follow his lead. 

“I have cried many times since Omonoia was founded,” he said. “My beloved players, play football, and you will receive your money,” he added, referring to the fact that players have not been paid for the last four months.

The club expressed its gratitude towards the pensioner through its official website.

Omonia has also begun the pre-sale of season tickets for the 2013-2014 season in an effort to collect funds. 

“The club has not yet exhausted the possibility of receiving help from supporters,” a statement from the club’s board said. “The board is obliged to give its all in a final effort to meet the deadline of March 31 to meet the FFP rules,” it added. “If the current board does not meet the deadline then the members will resign,” the statement said.

The club’s financial plight came to light last season after previous president Miltiades Neophtyou had bank-rolled a number of big money transfers. The club’s failure to reach the knock-out stages of the Champions League in the 2010-2011 season meant it was not in a position to meet the large wages it had agreed to on many of the players’ contracts. Although Neophytou decided to forgo the €17 million Omonia had owed him personally, a number of decisions to overspend on transfers and wages have crippled the club.

EUROPEAN Union competition regulators are investigating whether €104 million in state aid granted to national carrier Cyprus Airways (CY) complies with EU state aid rules, it was announced yesterday.

“The European Commission has opened an in-depth investigation into a number of public support measures in favour of Cyprus Airways,” a statement from the commission said. “At this stage, the commission has doubts whether these measures are in line with EU state aid rules.”

The European Commission said it doubted that the airline's capital increase, with a €31.3 million contribution from the Cypriot state, was conducted on market terms.

"In view of the company's financial difficulties and viability prospects the majority of private shareholders decided not to participate in the capital increase," the EU executive said.

The commission was also looking into a €73 million rescue loan for the ailing airline.

“It appears that loan payments have already been made in 2013. This would violate the so-called ‘standstill obligation’ in EU state aid rules, according to which state aid must not be granted before the commission has approved it,” it said. 

Moreover, Cyprus Airways had already received rescue and restructuring aid in 2007, the statement added.

According to EU state aid rules, companies in difficulty can receive rescue and restructuring aid only once over a period of ten years.

“The commission also doubts whether there is a credible restructuring plan for Cyprus Airways.”

The EU watchdog also questioned the state’s intention to grant compensation to redundant personnel over and above what they were entitled.

“The commission notes that the ex gratia compensation to redundant employees may constitute an advantage to the company,” it said.

The opening of an in-depth investigation gives interested third parties an opportunity to comment on the measures under assessment.

It does not prejudge the outcome of the investigation.

“However, the commission emphasises that no further state aid measures in favour of Cyprus Airways should be implemented without the commission's prior approval.”

On Monday, the airline said it more than doubled its losses in 2012 to €55.8 million, hit by falling passenger figures and freight earnings.

The company said it is implementing a turnaround plan, which includes outsourcing, redundancies and pay cuts.

The airline employs about 1,000 people and the restructuring plan, based on proposals by Air France-KLM, has called for cutting staff by 407.

CY has asked for €73 million to implement the restructuring plan.

Parliament begrudgingly made €16.3 million available to CY in December as part of a share capital increase. The state has a stake of almost 70 per cent in the airline. 

FINANCE Minister Michalis Sarris yesterday implicitly rejected a suggestion by the Central Bank chief that a levy be imposed on earnings from bank deposits, saying such a move might hurt confidence in the banking system.

"The cornerstone of confidence in the banking system is the integrity of deposits, so with that in mind, one has to look at whether it could have a negative impact," Sarris told reporters.

Central Bank Governor Panicos Demetriades said in an interview with the Wall Street Journal published on Tuesday that Cyprus could install a special levy on capital gains from bank deposits to finance the restructuring of its banking sector. 

Sarris said he had not had the opportunity to discuss the matter with Demetriades.

With its coffers virtually empty, Cyprus’ application for up to €17 billion in aid from international lenders has been complicated by worries about whether the island could ever afford to pay off such loans.

Ideas for making Cyprus’ debt sustainable have ranged from privatisations and securitising potential natural gas reserves to more extreme scenarios - ruled out by Nicosia - of depositors in Cypriot banks paying for the cost of the rescue.

“This is not an issue, which is on the table. It will be catastrophic for Cyprus and the eurozone,” Sarris said.

"I believe that message is gradually getting through, even to those who may have considered it a possibility."

Demetriades, who is a member of the governing council of the European Central Bank, was quoted as suggesting a "special solidarity levy" for Cyprus would only be applied for three years and could generate as much as €150 million a year. 

"Taxing 10 per cent of interest income for example would generate a substantial amount of revenue for the government," Demetriades said. 

The "special solidarity levy for Cyprus" would only be applied for three years, which would be the timeframe for an international rescue. 

"This is not a haircut and it's not a stealth tax. It could be implemented without undermining investors' confidence in the banking system and - unlike a tax - it could also apply to non-Cyprus residents," he said.

Labour Minister Haris Georgiades was more straightforward in pointing out that Demetriades’ comment was a mistake.

“Officials should think twice and three times what we are going to say and this goes for everyone,” he told state broadcaster CyBC. “The need for coordination and understanding before taking positions that bind or make things difficult for our side concerns everyone.”

Georgiades said the government’s position was that deposits should not be touched.

“We want to send a clear message that our banking system will be stabilised and deposits are fully secure,” he said.

The Central Bank sought to play down the issue.

“In the interview, the governor clearly referred to a contribution and not taxation,” spokeswoman Aliki Stylianou said. “We are clearly talking about a contribution that is relatively small because it will be calculated on the interest and not the capital.”

Representatives from the "troika" of lenders - the International Monetary Fund, the European Central Bank and the European Commission - started new contacts in Nicosia yesterday to clinch a deal.

The troika team held a lengthy meeting with Sarris but no statements were made afterwards.

They will also see President Nicos Anastasiades and Demetriades.

Anastasiades yesterday met with bank chiefs to discuss developments.

“We also heard from the banks about the progress regarding their restructuring plans,” Sarris said. “There are specific targets, timeframes that we must meet.”

While eurozone finance ministers have pledged to agree a bailout by the end of this month, little detail has emerged on how the rescue will be financed.

One condition however, would be to carry out a money laundering audit, expected later this month.

The head of Cyprus’ anti-money laundering unit (MOKAS) voiced her optimism yesterday that Cyprus would overcome this obstacle with success.

“We are optimistic because our legislation is very good and it is enforced,” Eva Papakyriacou said after meeting the troika representatives. 

“This is the idea, to prove there is nothing in Cyprus, that we are not lagging behind on the matter of enforcing international measures, when compared with other countries.”

THINGS are not looking good for Cyprus Airways. On Monday it announced losses of €55.8 million for 2012 which were more than double its losses for 2011. Revenue for last year was down by 17.6 per cent to €175.5 million and was mainly attributable to falls in passengers and freight. Announcing its results, the company said it expected the coming year to be challenging because of an economic downturn in its main markets of Cyprus and Greece.

It is astonishing how slow the airline has been to respond the economic downturn in its main markets. The signs were there from 2011, when it lost €24 million, but the airline went through all of 2012 without taking drastic action to cut its losses, secure in the knowledge that the state would eventually bail it out. Most of last year was wasted on putting together a restructuring plan and then on persuading the airline’s unions to accept it. 

We are now in March 2013, the company is losing millions every month but the restructuring plan has still not been implemented. There is a dispute over the amount of compensation that would be given to staff that would be made redundant, with unions insisting their members should be given bigger pay-offs than those stipulated by the redundancy law. There is no moral or legal justification for the unions’ demand but because Cyprus Airways is a state company, they feel it is obliged to give more generous compensation packages. It is the airline’s workers’ last chance to fleece the taxpayer.

This might not be an issue now that the European Commission has announced an investigation relating to the state assistance to the airline. In an announcement, the Commission expressed doubts over whether the government’s bailout of the airline was in accordance to the EU regulations on state assistance. It doubted that the increase of capital could have been justified by the laws of the market, while censuring the government’s failure to secure the Commission’s approval, as it was obliged to do, before granting part of €73 million to the company.

The Commission also pointed out that Cyprus Airways had last received state support for restructuring in 2007 and was eligible for such aid only once every 10 years; it even doubted the restructuring plan would be effective and objected to redundancy compensations higher in excess of what was stipulated by the law.

Under the circumstances the survival hopes of the national carrier seem very slim. The government, the board, management and unions failed to agree to a restructuring plan a year ago and now it might be too late for the airline to avoid closure. The taxpayer would still have to pay off its debts, but at least there would be no more bills to pick up in the future. 

THE HOLY Synod said yesterday it opposed draft legislation which regulates cremation and allows civil partnerships, and seemed to hint strongly it still upheld a mediaeval objection to the attendance in church of menstruating women.

It also said the church opposed a proposed change in schools which would see students no longer obliged to take religious studies. 

Speaking about civil partnerships, Paphos Metropolitan Georgios said that laws cannot determine what is right and wrong and that the church could not condone any partnership outside of an official church wedding.

“The church cannot accept the cohabitation of people of the same sex because Holy Scripture speaks of two sexes, male and female, that God created,” he said.

“The church advises those who have an addiction to homosexuality to fight against their urges as they would fight against any other passions. The goal of any law should not only be to regulate social differences or the satisfaction of desires, but to educate people correctly.”

Asked if the Holy Synod was completely opposed to cremation, the Paphos Metropolitan explained that it is difficult for the church to be completely against cremation as God could resurrect the dead from their ashes during the Second Coming. 

He said the subject of cremating the dead was not related to the Orthodox doctrine but rather about the church’s traditions. It is upon this tradition, he added, that the church placed its foundations and recommended the faithful accept the church’s suggestion about cremation, saying that he would not perform a funeral ceremony for anyone who plans to be cremated.

The cabinet recently passed a draft bill to enable couples to have a legally recognised relationship outside of marriage. A civil partnership allows a couple, living together but not married, to register their relationship with authorities so they can have the same obligations and rights as married couples.

The government also approved draft legislation regulating cremation in January.

Metropolitan Georgios revealed that the Holy Synod had also discussed complaints aimed at comments made by the recently appointed MEP Andreas Pitsilides who is also a theologian.

Although the metropolitan did not divulge the details of what the Holy Synod objected to, Pitsilides said he believed they were displeased with his recent comments in support of cremation and the attendance of menstruating women in church.

“Although I have not had the pleasure to be informed by the church of what comments I made that upset them, I assume it was my comment that women on their period should be allowed to worship at church and that cremation should be allowed,” Pitsilides told the Cyprus Mail. According to Orthodox dogma, menstruating women are not allowed to worship in church.

“Thankfully we no longer live in the middle-ages but in a modern, European Cyprus where experts and free-thinking people can express their opinions freely even if someone disagrees with them,” said Pitsilides. 

“I would like to thank the Holy Synod for their utter lack of any democratic sensitivity and ecclesiastical morals by inviting me to talk about their objections,” he added.

The metropolitan said that Pitsilides’ position did not reflect the morals, beliefs and way of life of the Orthodox Church and called on the MEP as a theologian not to express his personal position, but only the tradition of the church. 

The Synod also met with Education and Culture Minister Kyriacos Kenevezos yesterday and raised their concerns about proposed changes to religious education in schools, saying that pupils of other religions are being catered to instead of the vast majority of Greek Cypriot students. 

Addressing the minister ahead of the meeting, Archbishop Chrysostomos II said that it is the church’s desire to develop a good relationship with the ministry of education. 

“Having over 2,000 years of experience in the field of education, even during difficult periods, the church wants education to be Hellenic and based on religion where students can develop their knowledge and their virtue,” the primate said.

The right to be cremated after death has been the long-standing demand of the thousands of expats living in Cyprus - though it is believed that a growing number of Cypriots would also go for that option if it was available.

A bill to build a crematorium was first drafted and presented to parliament in 2000 by Marios Matsakis, then an MP.

Archbishop Chrysostomos II with Education Minister Kyriacos Kenevezos at the Holy Synod yesterday

A HEZBOLLAH member appeared in a Limassol court yesterday for the last time, before it rules on whether he plotted to attack Israeli interests for the Iran-backed Lebanese group.

If the court finds the Lebanese-Swedish man Hossam Taleb Yaccoub guilty when it delivers a verdict on March 21, it will strengthen calls for the European Union to follow the US lead and declare Hezbollah a terrorist organisation.

Yaccoub was arrested at Limassol port last year two weeks before a suicide bomber killed five Israeli tourists in Bulgaria in July, an attack Sofia blamed on Hezbollah, a charge the group denied.

The prosecution says Yaccoub tracked the movements of Israeli tourists on the island, noting arrival times of flights from Israel and registration numbers of buses ferrying visitors to hotels.

He pleaded not guilty to eight counts of conspiracy, consent to commit a crime and participation in a criminal organisation.

Yaccoub, who was 24 when arrested, has not denied he is a member of Hezbollah or that he carried out courier duties for the organisation in Europe. He says he never plotted any crime but merely acted on the instructions of a handler, who always wore a mask whenever they met.

In a wood-panelled courtroom packed with high school students on work experience, Yaccoub nodded in greeting before taking his seat in the dock, head bowed as he listened intently to proceedings translated from Greek to Arabic.

Unlike earlier appearances, Yaccoub was clean-shaven, and had laces on his shoes. The hearing was mostly procedural, with prosecutors and defence lawyers filing their closing arguments in writing.

The EU has resisted pressure from the United States and Israel to blacklist Hezbollah, arguing this could destabilise Lebanon's fragile government and contribute to instability in the Middle East.

But a guilty verdict would add to the pressure created by the bombing in Bulgaria for the 27-nation bloc to crack down on the organisation.

Hezbollah, now a powerful part of Lebanese Prime Minister Najib Mikati's government, says the accusations against it are part of an Israeli smear campaign.

The fact that it is currently not considered a criminal group is a matter Yaccoub's defence team is trying to use to its advantage.

"I have asserted the charges have not been proven because there is no proof that Hezbollah is a criminal organisation," said Antonis Georgiades, Yaccoub's lawyer who also said there was no witness evidence backing conspiracy charges.

Hezbollah was set up in 1982 with the help of Iran's Revolutionary Guards to fight Israeli forces which had invaded Lebanon. It was designated a terrorist organisation by the United States in the 1990s.

AN ANTI-graft bill was the highlight of some 70 items of legislation tabled to the plenum yesterday during the body’s first session after the formation of the new government.

A bill drafted by DISY and vetted by the Attorney-general aims to make it mandatory for state officials to declare their assets upon taking office and provide regular updates to a watchdog committee.

It provides the legal ammunition paving the way to amend article 15 of the Constitution, which thus far prevented the publication of state officials’ assets by invoking an individual’s right to privacy.

Previous attempts at forcing state officials to make their assets known had failed after the Supreme Court deemed the laws unconstitutional.

Article 15 does not allow for the violation of privacy unless “such intervention is provided by law, and if it is necessary only for the protection of security, or public order, or public health, or public mores, or the protection of the rights and liberties guaranteed by the Constitution to every person.”

Under the proposed amendment, an exception to the prohibition would be added, so that state officials’ assets may also be declared “in the interest of transparency in public life and to allow for effective measures to combat corruption.”

The item, approved by the Cabinet yesterday, is part of a batch of anti-corruption bills drafted by DISY in the run-up to the presidential elections.

Another bill concerns the accountability of state officials. In the event an independent committee of inquiry finds a state official responsible for actions or omissions during the exercise of his or her duties, the findings will be forwarded to the Attorney-general who will act on them.

Reports issued by independent commissions were thus far non-binding and had no legal force.

Also at the plenum yesterday, six DISY cadres were affirmed as MPs to fill President Nicos Anastasiades’ seat in the House and those of other deputies who were appointed ministers last week.

The new deputies are: Andreas Themistocleous, Maria Kyriacou, Nicos Nouris, Rikkos Mappourides, Prodromos Prodromou and Aristotelis Misos.

The six new MPs in the House yesterday (Christos Theodorides)

THE government plans to trim redundant personnel serving abroad, among others, as part of a broader drive to curb the state payroll.

The President has asked the Defence Ministry to explore the possibility of reducing the number of military attaches serving with Cypriot embassies overseas, the government spokesman said yesterday.

But the cutbacks would not be at the expense of the country’s level of representation abroad, Christos Stylianides said.

Despite the cost-cutting policy, the Cypriot diplomatic mission to Portugal is to be upgraded to an embassy, but this would be done purely for “political reasons,” he added.

Other instructions for downsizing have been issued to the Ministry of Justice concerning police officers. And various overseas activities of the semi-governmental Cyprus Tourism Organisation would be merged where possible.

Meanwhile, the Cabinet yesterday gave the nod to draft legislation allowing the creation of the position of junior minister.

The government intends to establish a maximum of six junior ministries, Stylianides said.

The purpose is to improve the functionality of the government but also to boost the country’s representation and participation in EU organs, which according to ruling DISY had been found wanting under the previous administration.

In spite of the addition of departments, Stylianides insisted, overall these would not pose an additional burden on state coffers.

He was not in a position to say which these would be.

But press reports suggested that a Junior Minister for Energy under the Commerce Ministry would be one of them; he would be tasked with the natural gas brief.

The item of legislation allowing for the appointment of junior ministers was tabled to the plenum later yesterday.

Its aim is to enable a minister to name one or more junior ministers, and to delegate to them powers or functions.

The junior ministers would be appointed by the Cabinet, and their terms of service would be the same as those of a minister.

A new law is necessary because current legislation allows a minister to delegate powers only to state officials, but not to persons appointed by the Cabinet.

FOREIGN MINISTER Ioannis Kasoulides yesterday played down reports that Egypt was preparing to annul its Exclusive Economic Zone (EEZ) agreement with Cyprus.

The minister commented after the Egyptian state-funded news agency MENA reported that the legislative committee of Egypt’s Shura Council drafted a law on Wednesday cancelling the current maritime borders of Egypt and Cyprus.

The Shura Council is the upper house of the Egyptian bicameral parliament, and according to reports, has limited legislative powers.

MENA reported the draft law was submitted to the Council’s legislative committee by MP Khaled Abdel Qader Ouda, who argued that renegotiation of the Cyprus-Egypt agreement delineating their respective EEZs and signed in 2003 “could mean billions of dollars for Egypt”.

Ouda was quoted saying the draft law “calls for the creation of new borders surrounding the economic zone in the presence of Turkey as a third party”.

Asked to comment, Kasoulides said: “The Egyptian government has never raised such an issue, nor has it questioned the agreement between two signatories of the Convention on the Law of the Sea, an agreement which has been submitted to the UN.”

He added: “Egypt is a friendly country to Cyprus and the issue arising from a news story by the 

Egyptian news agency refers to an internal discussion among Egyptian politicians in their upper house. The position of this specific MP is well known. I do not wish to intervene in Egypt’s internal discussions.”

Kasoulides highlighted that neither the Egyptian Foreign Minister raised doubts about their bilateral agreement during his visit to Cyprus last November, nor did Egyptian Ambassador to Nicosia Menha Bakhoum raise the issue during her meeting with the new Cypriot minister on Tuesday.

The Cyprus Foreign Ministry released a statement yesterday highlighting that the governments of both Cyprus and Egypt “fully respect and practically implement” the EEZ delimitation agreement signed in 2003. Egypt was the first country to sign an EEZ agreement with Cyprus.

“No problems have arisen between them in relation to the Delimitation Agreement,” said the ministry noting that Cyprus attaches strategic importance to its relations with neighbour and friend Egypt.  

“Cooperation in the field of hydrocarbons’ development in the areas adjacent to the Median Line of the EEZs of the two countries, as well as cooperation in other related fields, ranks high in relations and dialogue between governments,” it added. 

Cyprus has also signed EEZ delimitation agreements with Israel and Lebanon though the latter has yet to ratify it. 

Cyprus and Israel are also in negotiations on a unitisation agreement, stipulating how the two countries could commercially exploit any hydrocarbons found on the boundaries between their respective EEZs.

During the Egyptian foreign minister’s visit to Nicosia last November, his then counterpart Erato Kozakou Marcoullis said Cyprus and Egypt were also looking to launch negotiations on a unitisation agreement.

She noted that the prospects of cooperation between Egypt and Cyprus in the energy sector were “enormous”. 

However, Turkey continues to challenge Cyprus’ sovereign right to exploit its hydrocarbon reserves on two counts. First, it argues that any natural resources should be equally shared between both communities on the island, citing the 1960 treaties establishing the Cyprus Republic. Secondly, Turkey is not a signatory to the Law of the Sea Convention and does not recognise the island’s rights to delineate an EEZ, preferring instead a particular legal interpretation of what constitutes a continental shelf. In effect, Turkey is disputing Cypriot ownership of underwater natural resources in parts of its EEZ, saying it infringes on Turkey’s own rights.  

Media reports have suggested Turkey has been leaning on both Lebanon and Egypt to reject the EEZ agreements signed with Cyprus.

Cooperation in the field of hydrocarbons’ development ranks high in relations between the two countries the foreign ministry said

THE GOVERNMENT and Cyprus Airways (CY) have a “tough fight ahead” to convince the European Commission of the need to save the national carrier from closure, Communications Minister Tasos Mitsopoulos said yesterday. 

“We are facing a harsh reality and have to give a very tough battle,” Mitsopoulos said following the decision of the European Commission to investigate Cyprus aid to the state-owned airline. 

The minister said the commission feels “misled” by the Cypriot authorities and will need convincing that CY is worth rescuing. 

The commission announced on Wednesday that EU competition regulators have opened an “in-depth investigation” into whether €104 million in state aid granted to CY complies with EU state aid rules.

“At this stage, the commission has doubts whether these measures are in line with EU state aid rules,” said the statement. 

The commission said it doubted the airline's capital increase, with a €31.3 million contribution from the Cypriot state, was conducted on market terms. It is looking into a €73 million rescue loan for the ailing airline.

The commission noted that loan payments made to CY this year already appear to have violated the rules since they were made without getting prior Commission approval.  

Another violation being investigated is the fact that Cyprus Airways already received aid in 2007, though EU state aid rules specify that companies in difficulty can receive rescue and restructuring aid only once over a ten-year period.

The commission further doubted the credibility of the CY’s restructuring plan, and questioned the intention to grant compensation to redundant personnel over and above what they were entitled.

In its statement, the commission emphasised that “no further state aid measures in favour of Cyprus Airways should be implemented without the commission's prior approval”.

The latest announcement comes after the airline revealed on Monday that it had more than doubled its losses in 2012 to €55.8 million.

Commenting on the latest developments, Mitsopoulos said the commission requested information on the airline as far back as February 2012. 

“This means the commission feels that at some point it was misled and cheated for not being informed in time, either because it was given information that does not reflect reality or the Cyprus Republic has not respected its contractual obligations,” he said. 

The authorities were notified on January 10, 2013 by the commission that the measure taken providing state aid was illegal. 

The communications ministry will work in coordination with the finance ministry to send the message that the national airline needs to be rescued, said Mitsopoulos.  

The ministry will hire the help of Brussels-based legal advisors to figure out how to handle the situation, he added.  

“I believe valuable time has been lost, because at least we could have given the message that we are making a serious and structured effort to restructure and reform the company to make it more viable under the circumstances, limit the extent and size of its losses, and make it more functional,” said the minister.  

CY chairman Stavros Stavrou said the commission investigation was expected but questioned what will happen to the national airline in the meantime. 

He asked how the airline was expected to proceed with restructuring if it didn’t get the millions of euros needed to implement the plan. 

“If we don’t get it one way or another, than we can’t perform miracles,” he said. 

Stavrou argued that the EU is looking to get more information about measures taken, “but they’re not telling us to stop or not proceed with measures provided in the (restructuring) plan”.  

The chairman said he would discuss with the finance ministry to decide how best to move forward with the necessary redundancies as specified in the plan.

A BRITISH FAMILY are heading to the European Court of Human Rights after the Cyprus justice system dismissed inquest findings that a Paralimni doctor failed to diagnose their daughter’s ectopic pregnancy – which caused her death.

An inquest last year referred the case to the Attorney-general to pursue a criminal investigation after it was established that gross negligence on the part of the doctor and procedures at the clinic contributed to the death of 21-year-old Kalisha Gordon in 2008.

However, after a twelve month wait and countless letters to the Law Office of Cyprus for updates, the Attorney-general Petros Clerides stunned family lawyers by deciding that no action would be taken due to ‘insufficient evidence’, meaning neither the hospital nor the doctor will be brought to court by the state.

Clerides was scheduled to attend a pre-arranged meeting with father Lloyd Gordon last December to discuss the case, but pulled-out an hour before, leaving an official from his office to break the news that no action would be taken.

“The delays which the family of Kalisha have faced during the proceedings since the death of their daughter are unacceptable, therefore making emotional closure for her death almost impossible,” Rebecca Seaberg, a Legal Consultant at the law office of Georgiades and Mylonas told the Cyprus Mail.

Lawyers for the family have now received instructions to proceed to file a case on their behalf at the ECHR under the European Convention of Human Rights on the grounds that the state failed to proceed with criminal proceedings or an investigation into the death.

Friends of Lloyd Gordon have spoken of the family’s frustration with the clinic and battle for the truth, which was paid for by family, friends and fundraising efforts.

“Nothing can mask the agony being felt by the family. But it is making them more determined than ever. It is as if everyone in Cyprus just wants to sweep the death of Kalisha under the carpet,” a family friend told the Cyprus Mail last night.

The Gordon family decided to head to the European Court after opening a civil case against the doctor in December, which has now been postponed by the courts from a scheduled preliminary court date last month until September. Mr Gordon was given three days notice that the case faced an eight month delay.

“The way this family is being treated is not right, they had to fundraise and fight just to find out how their daughter died. I think they feel that a court away from Cyprus would be better at dealing with this, based on what horrors they have been through,” the friend added.

Mr Gordon and his family fought for nearly four years to receive a full explanation into the circumstances surrounding the death of Kalisha, who died on the final day of a working holiday in Ayia Napa. As she was packing to leave on July 30 2008, she fell ill with severe vomiting, chest pain and loss of consciousness. 

She died less than 24 hours later at the LITO clinic in Paralimni, leaving friends and family devastated. 

At the inquest, Judge Christos Philipou, sitting as coroner, established that Kalisha died as a result of a hemorrhage shock due to a rupture of the right ovary caused by an ectopic pregnancy.

The LITO clinic had originally claimed she died of a heart attack.

The inquest judge received evidence from a number of witnesses, clearly establishing blame with the duty doctor, who failed to diagnose that the pregnancy was ectopic. Faults in communication between the nurses at the clinic and the treating doctor were also to blame, with Judge Philipou adding that if proper care had been administered it is probable that Kalisha would have survived.

The duty doctor Petros Afxentiou claims he carried out a number of tests and did nothing wrong.

An ectopic pregnancy occurs outside the uterus, which is a life-threatening condition to the mother.

To make matters worse, the judge also stated that there were missing documents in the case medical file which warranted investigation by the police.

Kalisha Gordon

Heading to Europe: parents Jane and Lloyd Gordon

A LEADER of Germany's opposition Greens party says Europe should make the Cyprus' bailout conditional on reviving talks about reunification.

"In the debate about financial help for Cyprus the question of reunification of the island does not figure, regrettably," Greens joint chairperson Cem Oezdemir, who is of Turkish origin, told Reuters in an interview released yesterday.

"I believe this issue should be on the table as well as the need to reduce the banking sector, fight money laundering and end wage dumping," he said. It appeared to be the first attempt by a European politician to link a bailout to the dispute.

The government has requested up to €17 billion - roughly equal to the size of its economy - in emergency loans from eurozone partners and the International Monetary Fund.

German officials are pushing for depositors in Cypriot banks, including many Russian and British business people, to be made to contribute to the rescue cost in a so-called "bail-in".

The Berlin government responded sceptically to Oezdemir's call. One official, who asked not to be named, said it "would introduce a political element into the talks which would be difficult to measure".

Reunification eluded negotiators when Cyprus joined the EU in 2004. Turkish Cypriots voted in favour of a UN settlement plan but Greek Cypriots rejected it in a referendum. Oezdemir noted that the new president had supported Kofi Annan's proposal for a loose federation between north and south at the time.

"The new Cypriot president, [Nicos] Anastasiades, is someone we can really deal with," said Oezdemir.

German-born Oezdemir is one of some three million people of Turkish extraction living in Germany. His roots may make him more sensitive to the issues at stake in Cyprus.

Many Germans both in the opposition and in Merkel's own coalition are uneasy about sending taxpayers' funds to help Cyprus, which critics accuse of serving as a haven for money launderers and tax evaders. Cyprus rejects the criticism.

CYPRUS has become a colony once more, this time of Europe, or at least according to the lyrics of a new song by journalist and poet Leonidas Malenis says. 

The song sees Malenis re-unite with singer Stavros Hadjisavvas, who performed the song ‘Welcome Friends To Cyprus’ which was one of the many songs dedicated to Cyprus’ EU presidency.

“The song speaks for itself,” Malenis told the Cyprus Mail. “Through it I tried to describe my grief at becoming a colony once again”.

Malenis said his inspiration came from Brussels. “Our new conquerors in Brussels are the powerful nations led by Germany now, and it so sad to see our island fall victim to these nations that are taking advantage of our current economic problems,” he added.

Hadjisavvas echoed Malenis’ view and said it was an honour to interpret Malenis’ lyrics. “The song is a protest against the powers that wish to colonise Cyprus again,” he said. 

“We are hearing fairytales from various sources that the Europeans are here to help us and to save us but it is not the truth,” Hadjisavvas added. “The people of Cyprus should be troubled by what is going on around them right now and placing the finger of blame squarely on the shoulders of the politicians who keep feeding us lies,” he continued. “If this is the Europe we were promised then we don’t want any part of it,” he concluded.

The song begins by describing how Cyprus has become a colony of Europe but that it will never call it mother. The song also includes a sample from the anthem of the EU, Ode To Joy by Beethoven. 

Malenis insists the use of the German composer’s work is not ironic and that he has the utmost respect for Beethoven and his music.

“We frown upon football hooligans from England yet we love the work of Shakespeare,” he said. “We love the work of Beethoven but frown upon German politicians like Angela Merkel,” he added.

Malenis’ song Colony of Europe can be found at: www.youtube.com/watch?v=LtZh2OYDmm0&feature=youtu.be or on the link below

Stavros Hadjisavvas and Leonidas Malenis recording Colony of Europe

DEMETRIS Christofias might no longer be president, but the man he appointed as Governor of the Central Bank, Panicos Demetriades appears intent on continuing his work – the destruction of the Cyprus banking sector. There is no other way to explain the leaking of the 11-page memo that Demetriades presented to President Anastasiades about the state of the banking sector.

The main points of the memo, which painted a very bleak picture of the banks’ prospects and stoutly defended the methodology used by Pimco in deciding the level of capital assistance they needed, were published in Wednesday’s Phileleftheros. Given that the Central Bank has leaked information to the paper on several occasions in the past, it is reasonable to deduce it was the source this time as well.

After all, at a time when the government has urged the Governor to try to lower the banks’ re-capitalisation needs, it would be resoundingly stupid for it to release information to the press, about the allegedly, rapid rate of growth of non-performing loans as a result of the recession in Cyprus and Greece. Nor would the government have anything to gain from publicising a document which indirectly defended Pimco’s methodology and justified the use of the adverse macroeconomic scenario for calculating the banks’ capital needs.

In his memo Demetriades warns that the investigation of anti money-laundering measures by private firms could lead to withdrawal of deposits by foreigners, increasing the liquidity problems of the banks as well as their capital requirements, which in turn would increase the amount of financial assistance required. While this is a legitimate concern that he should have conveyed to government, did it serve the country’s interest to make it public? 

Certainly not. The leaking of the memo served only Demetriades’ personal agenda – to show he was against a private firm investigating allegations of money-laundering (as if the government had a choice in the matter) and that Pimco’s re-capitalisation figure was correct given the rapid growth of non-performing loans (therefore he was not to blame for agreeing to the company’s methodology and assumptions). Does Demetriades not realise he is not only undermining the government’s efforts to lower the capital requirements of the banks but also further destabilising the sector by releasing this type of information?

It was ironic that, in his memo, the Governor expressed concern about the money-laundering audit leading to withdrawals of bank deposits and threatening the stability of the banking sector. But the fact is that nobody has threatened the stability of the banking sector in the last 10 months more than Demetriades. And the leak of the memo he gave to the president shows he is intent on carrying on doing this. What else does he have to do to show he is unfit to be the Governor of the Central Bank?