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Backed into a corner over SGOs

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Author: 
Elias Hazou

WITH THE troika at the gates, election campaign declarations are taking a back seat to the exigencies of salvaging the economy. Pledges that the so-called ‘profitable’ semi-governmental organisations (SGOs) would be left untouched are now being put to the test.
Lines drawn in the sand before the elections are now being swept away by the tide of bailout talks. Publicly at least, the goalposts on what constitute acceptable terms of a bailout seem to be shifting by the day, by the hour. Mere talk of a haircut on deposits - which the government has rejected - means that priorities must be re-jigged.
On February 14, three days before the first round of the presidential elections, candidate Nicos Anastasiades met with the bosses of the Cyprus Telecommunications Authority (CyTA). “We are steadfastly opposed to privatisations,” he told them.
“We shall fight, making use of new reports concerning the recapitalisation needs of the banks, to avoid what is being threatened and what has been agreed,” Anastasiades had said, alluding to a clause in the memorandum of understanding (MoU) struck between the previous administration and the troika.
And in an interview with the Financial Times conducted on the day of the runoff vote, Anastasiades signalled he was not prepared to accede to some of the demands made by international lenders, particularly sweeping privatisations, which some in Brussels believe can raise as much as €2 billion and thus reduce the bailout figure.
“We’d like to discuss whether we can postpone [privatisation] for perhaps three years, depending on the pace of recovery and progress with other reforms,” Anastasiades told the FT. “There are several possible scenarios ?.?.?.? but we have to preserve social cohesion and peaceful labour relations.”
That was before. On February 27 finance minister Michalis Sarris appeared not to rule out privatisations, even displaying a certain bias on the subject. He told newsmen that consumers pay high prices and demand good services for public utilities, adding: “Who owns [the SGOs] is less important, and I think what is needed is to improve pricing and the quality of services offered.”
He did hasten to add, however, that the possibility of privatisations is linked to whether the national debt is sustainable.
Communist AKEL immediately pounced, prodding the new government to clarify its position vis-a-vis the SGOs. Anastasiades was apparently forced to repeat his pre-election pledge; he assured staff at SGOs that their jobs were secure and their rights protected whatever happened. No doubt there was a disconnect between the president and his economy czar.
A case of doublespeak, or were Anastasiades and Sarris doing the good cop/bad cop routine?
Article 3.7 of the MoU states: “If necessary to restore debt sustainability, the Cyprus authorities will consider a privatisation programme for state-owned and semi-public companies.”
That’s been the Anastasiades government’s throwback position whenever it’s called out on the SGOs: our hands are tied because the previous guys in charge already agreed to it.
It’s probably a little more complex than that; a more accurate description would be that the realities of talking shop with international lenders are starting to sink in.
Caught between a rock and a hard place, Anastasiades may well be forced to agree to privatisations. But besides the president eating humble pie, some commentators are suggesting that the fate of the SGOs will prove the first stress test for the DISY-DIKO alliance.
The pre-election pact forged between the two parties stated: “Semi-governmental organisations that are nationally and socially beneficial must not be privatised, but rather be supported, rehabilitated and rendered more competitive.
“Where state involvement relates to areas of a purely entrepreneurial nature, the prospect of a shares issue, a strategic partner or denationalisation would be examined.”
How would DIKO, a  traditional stalwart of SGOs, react should Anastasiades go back on his word? Would it strain the partnership?
That’s unlikely, thinks political analyst Christoforos Christoforou. For one thing, he says, the framework agreement between the two parties is so loosely worded that it’s subject to many different interpretations.
“Call it constructive ambiguity,” he jokes.
Moreover, the analyst doesn’t put much stock in pre-election rhetoric. The new government has very little wiggle room as it tussles with the troika. What with talk of a haircut on deposits and demands on Cyprus to raise its corporate tax rate - threatening both the financial sector and the country’s standing as an investment centre - the government has bigger fish to fry than worry about the blowback from denationalising state-owned enterprises.
That said, Christoforou advises that the government should still put up a fight for the SGOs, if only as a bargaining chip.
“They could insist on the state retaining a majority stake, that is, a partial privatisation,” he says.
Stavros Tombazos, assistant professor of political science with the University of Cyprus, likewise thinks it unlikely that privatisations would seriously damage the DISY-DIKO alliance.
He can see DIKO being convinced that privatisations are a necessity, under the circumstances.
“Pre-election promises have little weight because the situation right now is very difficult. We’re in the midst of the deepest economic crisis, one might even call it an existential crisis. Tough decisions are needed,” said Tombazos.
But Tombazos is not at all sold on the partial privatisation scheme, which the government appears to be inclined to.
“Even if you did find foreign investors, why on earth would they throw money at Cypriot SGOs without being assured of a controlling interest?” he asks.
“Or, if they did agree to buying shares, they’d pay less. Since as minority stakeholders they won’t be able to call the shots and to restructure the SGOs to cut costs and boost profits, they’ll be making less money on the dollar. So the lesser the incentive, the lower their offer.
“On the other hand, by selling 100 per cent of the SGOs, you’d be raising more than double the cash you’d get for selling just 50 per cent,” he argues.
Tombazos is also critical of the government’s staunch opposition to raising corporate tax.
“If you don’t do that, then where is the state going to get extra revenues to pay back the troika loan? You guessed it, it’s going to have to cut salaries and raise fresh taxes.”
But economic analyst Dr Stelios Platis is wary of selling off state assets to make a quick buck in order to help pay off the debt.
“Under these conditions we’d be talking about a fire sale, so would the cash be enough to make the debt sustainable? Probably not,” he told the Sunday Mail.
Platis warns also that by denationalising SGOs - particularly the electricity utility - state monopolies could be replaced by private ones, meaning a raw deal for end-consumers.
“Experience shows that Cyprus lacks the safeguards against the private sector abusing its power. Competition laws may be in place, but implementation is weak.”
Though Platis advocates the modernisation and restructuring of SGOs - in part to rid them of heavy political influence - he would not have them dismantled overnight because of bailout pressures.
And from an economic point of view, he does not believe that partial privatisation would improve the sustainability of the national debt.
“Current annual dividends to the state from SGOs are greater than the savings you’d generate by borrowing at a 2.5 per cent interest rate for a reduced debt [bailout] amount,” he says.
Still, if push comes to shove, and bank deposits or corporate tax are on the line, Platis would “rather privatise SGOs than sacrifice Cyprus and everything we have worked for over the past decades.”
He acknowledges that the present government is in a tight spot, but says there’s still some room for manoeuvre.
“It’s not black and white. Perhaps the government could retain a majority share in SGOs, but hand over effective control and management to a strategic investor. The devil is in the details.”
Government spokesman Christos Stylianides understandably chose his words carefully when asked for the administration’s position.
“If Cyprus’ debt is deemed unsustainable, then yes we are open to discussing privatisations, and then the question becomes the degree and manner of privatisations,” he told the Sunday Mail.
“But we’re trying to make sure it doesn’t come to that.”

* The heads of SGOs CyTA, the Electric Authority, the Port Authority and the Cyprus Tourism Organisation handed in their financial records to Finance Minister Michalis Sarris yesterday. A team from the ministry will go through the books to determine their current and potential values as talks with Troika continued.

 

Signs of a disconnect between President Anastasiade and Finance Minister Michalis Sarris over privatisations on the SGOs

Proposed UN visit over arms was ‘merely routine’

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FORMER foreign minister Marcos Kyprianou said yesterday the impression that the UN was prevented from visiting Cyprus over the munitions on the Monchegorsk had blown out of proportion what was a “routine matter”.

Cyprus seized nearly 100 containers of munitions cargo in early 2009 from the Cypriot-flagged Monchegorsk that was going from Iran to Syria, in violation of a UN Security Council resolution. 

But Kyprianou, one of the defendants in the ongoing trial over the death of 13 people killed when the munitions exploded, said that it was only after the July 11 blast at Mari in 2011 that a big deal was made over the fact that Cyprus delayed a visit by the UN Security Council’s sanctions committee. 

“(The visit) was routine and if it was promoted into a major issue after the July 11 blast, that’s another matter,” Kyprianou said yesterday.

The sanctions committee did not visit the country, because Cyprus did not extend an invitation, but Kyprianou told Larnaca Criminal Court yesterday that the UN’s request for a visit was in any case not his concern. 

The request was being handled by foreign ministry officials and Cyprus’ permanent representation at the UN, Kyprianou said. 

“When the ambassador did not handle the matter, then why would the minister get involved?” Kyprianou said. 

He said that in any case, the UN considered the Monchegorsk cargo matter finished with the confiscation, and the visit was related to the implementation of UN sanctions in general.

“The ship never reached its destination in Iran, the cargo was confiscated and we had volunteered all information asked of us… The matter was closed and there were no unresolved issues,” Kyprianou said.

He added that the committee never said in writing they were coming to visit the cargo, although Cyprus would have obliged them if they wanted to examine it because they “had nothing to hide”. He said the committee wanted to discuss state services’ co-operation in relation to the implementation of UN sanctions. 

The other defendants are 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.

Better use of police IT systems would reduce crime

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Author: 
Poly Pantelides

AIMING to tackle crime by sourcing information better, newly appointed justice minister Ionas Nicolaou wants to create an independent anti-crime committee to analyse statistics and data relating to crime, reports said. 

The committee will reportedly comprise of experts who will have access to police data and will make suggestions, while Nicolaou also said that he wanted to strengthen the police’s ability to monitor telephone conversations “under specific terms” that were not specified. The police already have access to personal data in the context of criminal investigations. 

Nicolaou told daily Phileleftheros that he wanted to implement an integrated IT system that would enable investigators to find patterns among kinds of crimes and cases. Part of Nicolaou’s vision as he described it is creating profiles for criminals in order to understand their motives, and where and how they operate. 

“We need to go deep into every case and compare it with others,” Nicolaou told Phileleftheros. 

Nicolaou could not be reached yesterday for comment and police spokesman Andreas Angelides said the police could not comment at this early a stage.

The police do not have computerised access to warrants issued by courts, which has led to such blunders as issuing a court writ in January to the name of a man who was murdered about a year earlier. 

Angelides said at the time the force was looking into computerising data bases within the force and with external services to avoid incidents of this sort. 

But according to Auditor General Chrystalla Georghadji’s 2011 report, only three out of the police’s 26 departments had fully digitised their systems with some departments reporting being in the early stages of the process. The problem persists across state services with even computerised services not being fully functional, Georghadji said. 

Nicolaou has promised a number of administrative and judicial changes during his term, including creating a constitutional and administrative court, and setting up a court for international commercial disputes. 

He has said that he wants to make the police more effective by decentralising power and merging departments, in order to clear the way for police headquarters to become co-ordinators and supervisors. 

A total of 18 people were murdered last year, with police solving 11 of those cases, compared with 2011 when eight people were killed but only three cases were solved by the police, according to data made available by the police chief. 

Following a number of police campaigns, break-ins were reduced last year by 12.6 per cent, from 3,379 in 2011 to 2,954 in 2012. But only 32 per cent of break-in cases were solved last year or 2011.  

Nicolaou has also said that he will increase the frequency of patrols in quiet neighbourhoods and city hubs.

Inspiration and information at TEDxNicosia

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Author: 
Poly Pantelides

HUNDREDS of people spent last Saturday at the Pallas theatre in Nicosia for TEDxNicosia, for a day full of speeches and conversation on how to “regenerate, rethink, and react”, at the second locally organised event licensed by TED, a non-profit organisation devoted to “ideas worth spreading”.

The Nicosia speakers talked on Saturday of ways for people to find their niche and capitalise on what makes them unique, of how perceptions of the “Other” can be broken down, the changing media landscape, how maths can be fun and ever-present, and how to find meaning through devastating life events such as the suicide of a father and armed robbery. 

Some 450 people filled the theatre’s seats and watched 12 speakers who were invited to give inspirational speeches that were spread out over a day with breaks, performances and inspirational TED videos, which have been viewed by millions of people online. 

One performance was that of young tenor Yiorgos Ioannou who has been invited to sing in this year’s Europa Nostra awards in Athens with respected tenor Placido Domingo.

Perhaps the most apt response to that performance was from one person on social networking site Twitter who said, “Holly molly! Check the voice on that kid! Jaw dropped at #TedxNicosia”. Hashtags are used on Twitter to enable people, including strangers, to discuss a set topic.

 In addition to being bowled over by Ioannou who looked like your average teenager until he started singing, people were humbled by one of the speakers, Roddy Damalis, the chef of Ta Piataka restaurant in Limassol. 

Larger than life, Damalis relayed the experiences that shaped him, his father’s suicide and taking on the role of the head of the family aged 15, a nervous breakdown nine years later and later an armed robbery and the threat, “today, you’re going to die” that came with “life altering peace” and the decision to sell everything and move out of South Africa. The talk was powerful, honest and funny despite the grimness. 

“We moved thirteen times. My father was a gambler, obviously not a very good one,” Damalis said at one point, an example of his concise delivery. One person on Twitter described Damalis’ speech as one of “the most inspiring and touching speeches”, while another described it as “an inspirational and passionate tale of tenacity and survival”. 

The Cyprus Mail’s Stefanos Evripidou also made some waves with his sobering talk on the state of journalism. 

The audience was so keen to attend that the first come first served tickets, costing €30 each and going towards organisational costs, were sold out within three days of being made available. 

But the event was being live-streamed courtesy of “exclusive partners” Cytamobile-Vodafone, and the videos of the talks and photos will be available online by March 31 on the TEDxNicosia website. 

“From a global perspective, this event aspires to be a window of Cyprus to the TEDx world, and vice versa,” a news release from the TEDxNicosia team said, more than a year after the first TEDx at the university of Nicosia in November 2011. 

“On a more local, even individual, level and given the dire financial crisis currently hitting Cyprus, TEDxNicosia created a platform to rethink certain things that we take for granted, or our plans for the present and the future; to regenerate our own personal energy, regenerate ideas and even hope; and to react to external and even internal stimuli to chart a new course,” the statement said.

To find out more, visit www.tedxnicosia.com or http://www.facebook.com/TEDxNicosia

Arrest in car shooting death

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POLICE arrested a 28-year-old man from Larnaca on Saturday night as a suspect in last Friday’s killing of 26-year-old Stefanos Vasiliades, who died from a gunshot to the head.

“The suspect was arrested in February on charges of possessing 170grams of drugs. After his release he blamed the victim for informing police,” police spokesman Andreas Angelides told the Cyprus Mail yesterday. “The suspect and the victim also had financial differences,” the spokesman said, adding that last summer the victim had allegedly tried to force the suspect to give him €10,000. 

“This pointed to a threat to the suspect,” he added.

The suspect, who denies any role in the killing, has been remanded for four days.

The 28-year-old was found in a Mitsubishi Pajero parked outside a mechanic’s garage on the road between Nicosia and Palechori, near to the village of Anayia.

The victim had a history of being arrested for illegal possession of explosives and illegal poaching but he had not been charged with anything.

Arrested for murder of taxi driver ten years ago

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Author: 
Peter Stevenson

POLICE in Paphos arrested a 39-year-old from Larnaca yesterday in connection with a murder ten years ago in Paphos. 

According to Paphos police, 48-year-old taxi-driver Charalambos Pericleous from the village of Salamiou was murdered in August 2003 near Tsada. The 39-year-old, who has not been named, is being held in a Paphos holding cell until he is brought before Paphos district court later today. 

Recent DNA checks on the murder weapon - a revolver - matched that of the 39-year-old suspect. His DNA had been on record after a previous unrelated arrest.

In August 2003, Pericleous had been sent to collect a customer near Tsada golf course when he was shot. His body was found around 500 metres from his car by a passer-by. He had been shot three times in the chest and point blank in the head with the revolver, which police found in some bushes nearby.

State pathologist Eleni Antoniou had said it was the bullet to the head that killed Pericleous. “The shot in the head was fatal,” she said. “He also had wounds in his left hand and shoulder blade.”

Police had originally believed Pericleous’ murder was connected with that of 65-year-old Michalis Zacharias in Marathounta two months earlier, since the two men worked in the same taxi office and both died after they were asked to collect customers in remote areas.

Pericleous had also been questioned by police over Zacharias’ death, as had his son, but they were released without charge. 

Zacharias was found dead at a construction site on the old Episkopi to Marathounta road. He had been called to pick up a customer from Episkopi but never returned. State pathologist Sofocles Sofocleous said at the time that he had been stabbed 20 times in the back and throat and bludgeoned with a stone. 

Police had initially believed Zacharias was killed for the large amount of cash he was carrying in his taxi. They then said the two murders could have been the result of a feud.

No one was ever charged in connection with Zacharias’ murder.

Officials deny any delay in gas drilling

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Author: 
Elias Hazou

OFFICIALS here are confident that Noble Energy can start confirmation drilling at the Aphrodite 1 well this summer, and have also confirmed the possibility of a second prospect in offshore Block 12.

“We’re hoping for appraisal drilling at Aphrodite before the end of July,” said Charles Ellinas, chairman of the state hydrocarbons company KRETYK.

He was speaking to the Mail yesterday shortly after meeting with the Noble team for a progress review.

Provided the US company presses ahead with follow-up drilling sometime in the summer - “not autumn” - then there was “no problem in terms of adhering to the timetable”, he said.

The actual timetable has not been made public due to a confidentiality clause. But press reports have indicated that Noble’s licence on Block 12 expires this October.

The concession could be renewed for another two years, however.

Ellinas dismissed the notion that confirmation drilling at the Aphrodite prospect - which holds an estimated gross mean of 7 trillion cubic feet of gas - has been delayed.

Contrary to media reports over the past months, he said, Noble never gave authorities a definite deadline.

“So one cannot say there’s been a hold-up. These things take time to plan. There’s the question of rig availability, and then of course they have to get the permits from authorities here. We need to be careful about setting artificial deadlines,” said Ellinas.

And far from losing any interest, Noble is being very “aggressive”, he added.

Solon Kassinis, former energy chief and now executive director with KRETYK, said the rig earmarked for follow-up drilling at the Aphrodite well was the Ensco 5006.

It’s understood the rig, which was busy in Israel’s Leviathan 4 well, will be relocated to the Karish 1 prospect off Haifa within days to drill an exploratory well. The platform is currently undergoing repairs in Malta.

In a statement released last week, Noble said exploratory drilling at Karish “is expected to reach total depth in the second quarter”. Given exploratory drilling typically takes around three months, that timeline would tie in with the tentative June-July date cited for the start of appraisal drilling in Cyprus’ Block 12.

Moreover, Kassinis confirmed recent reports that Noble is mulling exploring a potential second gas field in Block 12.

According to daily Phileleftheros, which broke the story, this second prospect could hold up to 5 tcf.

“We believe there are good indications there,” Kassinis commented.

Noble would soon be commissioning a 3-D seismic survey of the prospect, he said.

Noble Energy received the concession to explore Block 12 in October 2008. In August 2011, the Texas-based company entered into a production-sharing agreement with the government regarding the block's commercial development.

The production-sharing contract with Noble dictates that the explorers must relinquish 25 per cent of the acreage in a licensed territory after the first three years, and another 25 per cent after the next two years.

 “So before they abandon a parcel that could be promising they would carry out seismic surveys so they know what’s there,” Kassinis said.

Energy and Commerce Minister Giorgos Lakkotrypis told reporters he would be discussing a possible second gas field when he meets with the Noble people today.

Lakkotrypis reiterated that confirmation drilling in Block 12 was a top priority.

Asked last week to comment on the fact that Cyprus’ international lenders refuse to take into account the country’s earnings from natural gas reserves in their estimate of the amount of financial assistance needed for Cyprus, Lakkotrypis said “this is the main reason we urgently need to proceed with the confirmation drilling.”

“If there is confirmation of the reserves and these are validated, we can then declare these deposits as marketable at a specific value,” he added.

Cyprus’ international creditors - the troika - have so far been reluctant to take possible future gas earnings into account for the purposes of a loan repayment, because the gas reserves are as yet unproven, pending confirmation drilling.

Media reports said the government raised the issue last week during talks with the troika mission in Nicosia.

A report on potential earnings from natural gas - prepared by Kassinis - was forwarded to the commerce ministry about a fortnight ago. It’s not clear whether the government made use of the report in its dealings with the troika.

Responding to questions, the commerce minister yesterday ruled out advance sales of natural gas.

Sources pointed out to the Mail that, even if the commercial value of Block 12 were available today, the earnings would be spread out over 25 years - longer than the repayment period for a bailout.  Consequently, revenues from Block 12 alone would likely not be enough to have a real impact on the debt repayment.

Cyprus has awarded concessions other than Block 12. On January 24 the previous government signed contracts with ENI/KOGAS (an Italian-Korean consortium) for hydrocarbons exploration in blocks 2, 3 and 9, and on February 6 concluded similar deals with France’s TOTAL for blocks 10 and 11.

Meanwhile Ellinas and Kassinis yesterday departed for Milan for talks with Italian energy giant ENI.

ENI would be laying out their work plan - such as their proposed timetable for seismic surveys -as well as their budget for Cypriot operations for this year, Kassinis said.

Archbishop: church’s bank has been wrongly caught in troika net

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Author: 
Elias Hazou

 

ARCHBISHOP Chrysostomos has threatened to sue the previous government for placing Hellenic Bank - of which the church is a major shareholder - in the troika’s crosshairs.

The cleric revealed on Sunday that he has instructed Hellenic’s board of directors to explore the possibility of suing former finance minister Vassos Shiarly and Central Bank governor Panicos Demetriades.

The prelate said these two officials were responsible for including Hellenic in the terms of reference of PIMCO, an investment company tasked with carrying out a due diligence of the Cypriot financial sector.

This was despite the fact Hellenic is a healthy bank and does not require state assistance, Chrysostomos said.

“Many a time the former president said it’s the banks’ fault [for the bailout]. All right, the banks are not blameless, they are not innocent doves...but who was it that condemned the banks?” said the top cleric.

He was alluding to former President Demetris Christofias, who some say sought to pin the need for a bailout on the banks by deliberately over-stating their financial woes.

Banks have expressed strong disagreement with the procedure used by PIMCO in carrying out the due diligence into their portfolios. They say that their needs were exaggerated.

In its adverse scenario, PIMCO said bank recapitalisation needs were between €8 and €10 billion.

Recent reports suggested Bank of Cyprus will need between €2.8 and €3.9 billion, and Popular Bank anywhere from €2.7 to €3.8 billion. Under the adverse scenario, Hellenic would require €333 million, while Greece’s Alpha bank needed €149 million.

Chrysostomos took a swipe at PIMCO itself, questioning its credibility:

“If it were a serious company, it should have investigated and come up with a single number [scenario]. But the fact it has come up with two numbers and two different proposals makes me suspicious,” he said.

The implacable Chrysostomos also issued a warning to international creditors, who, he said, were placing unreasonable demands on Cyprus in ongoing bailout talks:

“If their goal is to destroy us, then we should have the courage to tell them that we can survive on our own, with the Cyprus pound that we had before,” he asserted.

And he urged the political leadership to get tough with the troika:  “We can tell them that we are entertaining thoughts of leaving the euro.”

 


Greece and Cyprus will turn crisis into opportunity

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Author: 
George Psyllides

CYPRUS will rise again, President Nicos Anastasiades said yesterday, stressing his determination to take all necessary measures to beat the island’s economic woes that brought it to the brink of bankruptcy.

“We have been through tougher times and we managed to rise again,” Anastasiades said following talks with Greek Prime Minister Antonis Samaras in Athens. 

Referring to the Turkish invasion in 1974, Anastasiades said “the biggest catastrophe was transformed into an economic miracle because we have stubbornness and determination.”

Anastasiades said the two sides had a productive and fruitful discussion, which confirmed “our willingness for closer cooperation”, to the benefit of both countries.

The Cypriot president said that during his talks with Samaras, it emerged that there is a prospect of turning the crisis into an opportunity, in order to reverse negative developments faced by the two countries.

The Greek premier highlighted Cyprus’ importance for his country.

Samaras said Cyprus was Greece’s fourth biggest trade partner - Greek exports to the island exceed €1.0 billion - while Greek investment in Cyprus reached 27 per cent of the total and 71 per cent of all Greek investment in the eurozone. 

He thanked Cyprus for offering employment opportunities to many Greeks, following the financial crisis.

“Consequently, current economic developments in Cyprus concern Greece directly and I am convinced that the president’s efforts to secure adequate financing on the best possible terms will soon bear fruit,” Samaras said.

The Greek prime minister added that Greeks are going through challenging times, both in Greece and Cyprus and he expressed his conviction that they will emerge stronger, having acquired a more significant geopolitical and geostrategic role.

With regard to the exploitation of Cyprus’ natural resources, Samaras highlighted the recent agreements signed between Cyprus and several big companies, which he said signified the important opportunities opening up in the Eastern Mediterranean.

Our View: Resumption of pay cuts saga keeps heat on Supreme Court

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THE SAGA OVER the cuts to the pay of judges returns to the Supreme Court today, when the Attorney-General is expected to present the case of the state. 

On January 28, the lawyers representing the district court judges argued that the pay cut was a violation of the constitution, which stated that the pay and terms of employment of a judge could not be changed unfavourably after his appointment.

As we have written several times in the past this article of the constitution safeguarded the independence of judges by ensuring a judge was not penalised by the executive in the event he took a decision that it did not like. 

But every judge who filed an appeal to the Supreme Court knows very well that the pay-cuts were imposed on all public sector employees, because our bankrupt state needed to cut its spending. The independence of the judiciary is not under threat, by any stretch of the imagination.

According to press reports, this would be the defence of the Attorney-General who would, quite correctly, argue that the judges were not being targeted by the state and their independence was not being threatened. It is depressing that our educated and learned judges fail to recognise this point and are behaving like selfish unionists who are citing an article of the constitution not in order to protect their independence but rather their personal interests. This is what their appeal is about. 

As for their offer, to contribute the equivalent amount of the pay-cut as a monthly, voluntary contribution to the state, it would leave them better off than all other public employees because their retirement bonus and pensions would be based on their full salary. And what would happen if in a year’s time half the judges decided they would no longer make a voluntary contribution to the state, because there was no law that obliged them to do so. They could argue, given their union mentality, that it was a violation of the constitution for any employee to contribute part of their monthly salary to the state. 

In fact, there is no guarantee that all judges would agree to make the voluntary, monthly contribution to the state and the Supreme Court was wrong to have supported such an arrangement so it would not have to issue a ruling in the case. But why is the Supreme Court reluctant to issue a decision? Does it fear that it would have to uphold the appeal, something which would be perceived by the public, wrongly, as a dubious decision aimed at safeguarding all judges’ interests?

Attorney-general Petros Clerides is expected to present the case of the state (photo by Christos Theodorides)

Signs of climb down on corporate tax rate

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Author: 
George Psyllides

 

THE GOVERNMENT appears prepared to agree to a small increase in Cyprus’ corporate tax rate to stave off IMF pressure for investors to take losses on bank deposits as part of a bailout, a source close to the talks with international lenders said yesterday.

A source with direct knowledge of the government’s consultations with the lenders told Reuters that a "small" corporate tax increase could be considered by Cyprus, along with a temporary levy on capital gains.

"It looks like consultations are starting to yield results, and the proper compromises are being found," the source said.

International lenders, who resumed talks with Cyprus last week, have asked the government to raise its corporate tax rate to 12.5 per cent from 10 per cent, and introduce a capital gains levy, to ensure it can repay an international bailout which it requested last year.

Media reports have also suggested that Cyprus would ask Greece to use some of the funds from Athens' EU/IMF bailout to help Cypriot banks with a presence in Greece. 

Athens, however, played down such talk yesterday.

"There has been no specific request by the Cypriot side to Greece to contribute to the recapitalisation of Cypriot banks," Greek government spokesman Simos Kedikoglou told reporters after President Nicos Anastasiades met Greek Prime Minister Antonis Samaras in Athens yesterday.

Ahead of the two leaders’ meeting, Finance Minister Michalis Sarris met his Greek counterpart Ioannis Stournaras in Athens on Sunday.

“What there is is close cooperation and determination to get out of the crisis together,” Kedikoglou said.

Cyprus needs up to €17 billion in emergency loans - almost the size of its gross domestic product - mostly to recapitalise its banking sector, which has been hit by its exposure to debt-laden Greece.

The island’s corporate tax, among the lowest in the European Union, was previously considered a no-go area but harsher alternatives mooted by international lenders appear to leave little option.

Seen as more serious threats are a haircut on bank deposits and financial transaction tax (FTT).

“As a state we need to make certain choices because at the end of the day the bailout accord is necessary to avoid bankruptcy,” ruling DISY deputy chairman Averof Neophytou told the state broadcaster yesterday. “You cannot reject everything. At the end we will look at the pros and the cons, lay out priorities then decide what measures can be taken which are not destructive for the promotion of growth."

Although government sources said the European Commission has ruled out a haircut on deposits, the IMF insists on keeping the option on the table.

German officials, backed by the Netherlands and Finland, have pushed for depositors in Cypriot banks, many of whom are Russian and British business people, to help pay for the cost of the rescue.

Cyprus, fearing a rapid withdrawal of funds from the island, says any haircut on deposits is out of the question.

Other measures that could be part of a bailout agreement are privatisations of public companies a couple of years down the line, a 40 per cent tax on revenues over €100,000 and a levy on income from interest, reportedly at 10 per cent. 

Talks between international lenders and the government continued yesterday on a technocratic level as reports said Cyprus wanted to wrap up the agreement by March 15.

 

Greek Prime Minister Antonis Samaras and PResident Anastasiades in Athens yesterday

Drilling in other blocks could begin next year

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Author: 
Stefanos Evripidou

DRILLING IN other blocks of Cyprus’ Exclusive Economic Zone (EEZ) could start in early 2014, said former energy chief Solon Kassinis yesterday.
Speaking from Milan to state broadcaster CyBC, the new executive director of state hydrocarbons company KRETYK said Italian-Korean consortium ENI-KOGAS had an “aggressive programme” for hydrocarbons exploration in Cyprus’ EEZ.
Kassinis and KRETYK head Charalambos Ellinas are in Milan for talks with the consortium on their proposed timetable for seismic surveys as well as their budget for Cypriot operations this year.
The Cypriot delegation also discussed how to fund training of young scientists in Cyprus.
In late January, the previous government signed contracts with ENI-KOGAS for hydrocarbons exploration in blocks 2, 3 and 9 of its EEZ, and on February 6 concluded similar deals with France’s TOTAL for blocks 10 and 11.
According to Kassinis, the Italian-Korean consortium will be in Cyprus on March 19 to present their work plan to Commerce Minister Giorgos Lakkotrypis. 
Regarding ongoing discussions in Milan on the consortium’s plans for the future, he said: “We believe it is an aggressive programme.”
Kassinis noted that ENI-KOGAS discussed the prospect of carrying out two and three-dimensional seismic surveys of the areas licenced at the same time, “so by the end of the year, or beginning of the next, they can start drilling...within a year in other words”.
The KRETYK director highlighted the kind of message this will send to Cyprus’ international creditors (the troika) who have so far been reluctant to take possible future gas earnings into account for the purposes of a loan repayment.
The international lenders are likely taking into consideration the fact that Cyprus’ gas reserves- so far an estimated gross mean of 7 trillion cubic feet in Cyprus’ block 12- are as yet unproven, pending confirmation drilling.
Noble Energy received the concession to explore Block 12 in October 2008. In August 2011, the Texas-based company entered into a production-sharing agreement with the government regarding the block's commercial development.
Lakkotrypis confirmed on Tuesday evening that Noble is due to start confirmation drilling for hydrocarbons in block 12 between July and September this year, after meeting with Noble officials. 
The minister added that in addition to the confirmation drilling, Noble was due to start a second exploratory drilling also in the third quarter this year, to look for a potential second gas field in block 12.
Its current exploratory licence expires in October though renewal is a likely possibility. 
A second prospect could reportedly hold up to 5 trillion cubic feet.

 

Formula One coverage up in the air

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Author: 
Peter Stevenson

THERE IS uncertainty over whether people on the island will be able to watch live coverage of the opening race of the Formula One Championship this Sunday.
The first race will take place at 8am local time and will be broadcast from Melbourne in Australia but with no TV channels having purchased the rights for the season or even the first race yet, local viewers could be left out in the cold again.
There was a similar scenario last year as local subscriber channel LTV obtained broadcasting rights after the second race of the season, purchasing the rights for the 17 remaining races separately. “The broadcasting rights for races or the whole season can be purchased from Formula One Management (FOM), the company owned by racing magnate Bernie Ecclestone,” LTV sportscaster, editor and producer Frixos Massouras said. “If you purchase the rights to the whole season you get some extras like practice sessions and qualifying,” he said.
Although exact figures were not available, Massouras stated that purchasing the rights for three seasons in a row comes to almost €1 million.
He explained that without advertising, LTV would not be able to purchase the rights and although in the past, people complained about interruptions to coverage of the race, they were becoming more and more understanding of the expensive cost of broadcasting rights. “If you take the case of the World Rally Championship (WRC) you will see that nobody in the UK televised the first race of the season last weekend,” he said. “And in the UK you have multi-million pound companies like Sky who decided against paying for the rights which shows you the state of things,” he added.
There are other means with which people can watch the race this weekend but that would either involve finding an illegal stream of the race from the internet or an illegal satellite-dish set-up. Massouras recommended that people remain patient and try to understand the difficult financial climate which surrounds the country right now. “Formula One Racing is a niche market and with people counting every penny right now we hope that a solution and more advertising can be found,” he added.

Putting an end to late-payment culture

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BY THIS Saturday, EU member states will be expected to have put in an end to what the Commission calls the damaging late payment culture that endangers small and medium-sized businesses.
“Every day across Europe, dozens of small and medium sized enterprises (SMEs) go bankrupt as their invoices are not paid. As a result jobs are lost and business opportunities remain unexploited, stalling our return to economic growth,” the Commission said in a statement yesterday.
By March 16, member states will need to have integrated the revised Late Payments Directive into their national law. It obliges public authorities to pay for goods and services within 30 calendar days or, in very exceptional circumstances, within 60 days.
Businesses should pay their invoices within 60 calendar days, unless they expressly agree otherwise and if it is not grossly unfair to the creditor, said the Commission.
European Commission Vice President Antonio Tajani, Commissioner for Industry and Entrepreneurship, added: "SMEs find it particularly difficult to stand up for their right to prompt payment. Late payments mean SMEs lose time and money, and disputes can sour relations with customers. This damaging late payment culture has to end. It is now time for member states to implement the Late Payments Directive into their national law - giving SMEs the vital support they need in these difficult times and helping them fulfil their key role in European job creation.”
The new rules provide that enterprises are automatically entitled to claim interest for late payments and can also automatically obtain a minimum fixed amount of €40 as a compensation for payment recovery costs. They can also claim compensation for all remaining reasonable recovery costs.
The statutory interest rate for late payment is increased to at least 8.0 percentage points above the European Central Bank’s reference rate. Public authorities are not allowed to fix an interest rate for late payment below this threshold.
Enterprises can challenge grossly unfair terms and practices more easily before national courts.
The new measures are optional for enterprises, insofar as they acquire the right to take action but are not obliged to do so. In some circumstances, a business may wish to extend the payment period for some days or weeks to keep a good commercial relationship with a specific client. But the new measures are obligatory for public authorities.
“They should lead by example and show their reliability and efficiency by honouring their contracts,” said the Commission.

Dog poisonings being investigated

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Author: 
Maria Gregoriou

A NUMBER of dogs have died from suspected cyanide poisoning in the Lania and Finikaria areas lately, from eating a substance known as candlewax poison.
One dog owner from Lania was walking her three dogs on Sunday evening when two of them licked a white substance attached to a stone. “I was walking my dogs on the hills above Lania when two of the three licked some white stuff that looked like lard. Immediately they started rolling on the ground and were dead within ten minutes. From the looks of things it must have been chicken fat mixed with cyanide,” said the dog owner.
“I went back the next day to collect the remaining substance and took it to the Lania police station and the Limassol veterinary services,” she added. “There were also some people at the veterinary from Finikaria who also lost their dogs to this substance,” she said.
The substance has been given to the police and it will be kept for two months. If any suspects are located within this time then the evidence will be tested, if not it will be destroyed, sources at the Limassol veterinary services said.
“We have already sent out our team to Finikaria and will be visiting Lania after this incident. We will inform the local authorities and try to push them towards warning the local citizens. This substance is not only dangerous to dogs but also to people,” they added.
The sources said these were the first cases of poisonings this year.  They also said the substance seemed to have been freshly laid as it would have lost its effects after rainfall.
“We always have these kinds of problems which are caused by irresponsible people,” they added.
The Lania area is a popular spot for families to spend Green Monday, which is on March 18 this year. Many local residents have shown concern about children touching this substance and harming themselves.
Former Environment Commissioner Charalambos Theopemptou, has expressed concerns in the past about the practice of many farmers leaving poison around their premises to ward off packs of stray dogs that have formed in certain areas. “In their attempt to make sure hunters stay off their farms, farmers are placing poison which can be dangerous for any animal,” he said.
More details can be found on the facebook page ‘Cyprus Poison Altert – Skippy Kit.’


Candlewax poison has been killing dogs

Unpaid doctors refuse to work on-call

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Author: 
Maria Gregoriou

DOCTORS at Limassol hospital’s emergency room have lashed out against not having been paid for on-call services since May 2012 by refusing to work on stand-by.
This has resulted in understaffing, which in turn has forced some patients to turn to private practices for medical care.
Around 20 people have sent letters to Limassol hospital demanding reimbursement of the money they spent on private care. In the letters they blame the state for not being able to provide them with the proper care.
But the doctors say it is not their fault. “This is a tragic situation. We have not been paid since May, 2012. We are supposed to have four people on stand-by but we only have two most of the time. No one cares.  The people from behind the desks make the decisions. It is easy for them to cast judgement when they do not see what happens in the emergency room on a day-to-day basis. We are not in a working environment where we can just sign papers, we work with sick people who need hours of attention,” the emergency room staff said in a statement.
In any given day, they said they see around 20 patients an hour. “We cannot keep up with this work load and many lives are at risk. There have been situations where a patient had a heart attack while waiting,” they said.
The emergency room staff said they had not been paid for the extra time they’ve put in. “Money can be cut and saved from many departments but not the emergency room. This is where it is a matter of life or death,” they added.
The staff are waiting for approval from the ministry of finance to pay the doctors who are on the A13 pay scale or above. “All doctors below this scale have already been paid,” said an employee in the accounting department of Limassol hospital.
Out of the 14 doctors who work at the Limassol emergency services department, six are on the A13 pay scale and above.
Doctors who are on a high pay scale are avoiding being a part of the on-call rotation and some are outright refusing to work on standby, as they know that they will not get paid. This leaves others to cover their on-call shifts, resulting in understaffing.
At the end of November last year some doctors went on strike, protesting their lack of pay.



Atmospheric dust reaches record levels

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Author: 
Maria Gregoriou

THE DUST in the atmosphere coming from the Sahara hit record levels yesterday, marking the air quality map with numerous red dots, or danger zones.
“The dust in the atmosphere has gone beyond the highest levels recorded,” said Adamos Adamides, an official at the labour inspection department, which monitors the atmosphere.
“During this time last year, the levels were at the orange and yellow levels of high and moderate,” Adamides said.
He said that at lunch time yesterday “all indicators at all stations in Cyprus” were in the red zone.
“Because of this we advise the elderly, children and people with health problems to stay indoors. We would also advise those who have to work outside to wear the appropriate means of personal protection,” Adamides said.
 “We have also warned the ministry of education about the dangerous increase as some schools had taken the children outside for physical education,” Adamides said.
The department of labour inspection released a statement announcing that at 8am yesterday “the hourly concentration of breathable particles in ambient air, with a diameter less than 10 micrometres (PM10), were between the maximum value of 552  and the minimum value of 24 micrograms per cubic metre.”
“Consequently it is expected that the average 24-hour concentration will exceed the corresponding limit of 50 micrograms per cubic meter, as defined by the relative legislation” the statement said.
“On Monday March 11, the average 24-hour concentration of respirable particles was between 88 and 350 micrograms, depending on the location,” it said.
“This is a natural phenomenon that depends on the wind cycles the blow dust over our area,” said a spokesperson from the meteorological service. “The flow will change over the weekend to south-westerly winds and the dust will start to lift. By Sunday the atmosphere will be clear. Some rain fall over the weekend will also help,” they added.


The elderly, children and people with health problems should stay indoors as long as the dust remains

Deal on terms for independent audit

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CYPRUS and international lenders yesterday agreed on the terms of reference of an independent audit into the island’s anti-money laundering legal framework and its implementation, which is one of the conditions set by the EU for the island’s bailout.
The audit into Cyprus’ legislation against money laundering will be conducted by an independent private firm with the participation of the Moneyval Committee of the Council of Europe and the supervision of the Central Bank of Cyprus.
According to the Cyprus News Agency (CNA) the Central Bank has invited six international companies to submit their bids.
The decision on which firm will undertake the audit is expected on Monday or Tuesday.
CNA said the findings must be submitted by March 31 in a bid to have a deal on the island’s bailout by the end of the month.
Citing unnamed sources, CNA said bank clients should not worry about the audit because “bank confidentiality and personal data have been secured.”
Cyprus has repeatedly rejected allegations, mainly from Germany, that banks engage in money-laundering activities.
Berlin has claimed that Cyprus has become a conduit for money-laundering as Russian individuals and companies have a high level of deposits in the banking sector.


 

Confusion over IMF participation

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Author: 
Stefanos Evripidou

CYPRUS APPEARS to be entering the final lap in terms of convincing international creditors to agree to a bailout of the tiny island but confusion still reigns over whether the European institutions have convinced the International Monetary Fund (IMF) to participate.
Germany made it clear when talks for a bailout began that they wanted the IMF on board for any bailout. However, two articles from Bloomberg on Tuesday appeared to muddy the waters somewhat as to the latest intentions of Germany and the IMF.
An initial report by Bloomberg quoted a close ally of German Chancellor Angela Merkel hinting that the EU powerhouse no longer insists on the financial contribution of the IMF to a bailout. 
Michael Meister, deputy parliamentary floor leader of Merkel’s Christian Democratic Union party, appeared to rule out a haircut of bank deposits in an email exchange with the financial newswire, something which Germany’s finance minister Wolfgang Schaeuble has so far refused to take out of the equation, despite serious deposit outflows from Cypriot banks as a result of the uncertainty.  
The statement from Meister appeared to come after the election of Nicos Anastasiades to the Cyprus presidency ushered in a new climate in the bailout talks, reintroducing the possibility of privatisations if necessary, as well as an increase in the corporate tax rate.
Meister was also originally quoted saying Germany is no longer insisting on a financial role for the IMF. 
“What we want is the fund on board making its mark on the bailout package. That’s of central importance to us,” he was quoted saying.
According to reports, the IMF was the most ardent supporter of a haircut on bank deposits fearing that Cyprus’ public debt would be unsustainable if it soared to around 145 per cent of GDP.
With the IMF not involved, perhaps in exchange for privatisation pledges or a greater financial role for Russia, this theoretically frees up the European Commission and European Central Bank to move ahead with a bailout package. 
However, on the same day of the article’s release, Bloomberg published a second article “correcting” Meister’s comments where the influential German lawmaker was now quoted saying first Cyprus had to prove that it was of systemic relevance to the eurozone before it could secure an international bailout.
Then the troika has to agree a draft memorandum on a bailout, outlining Cyprus’ debt sustainability while taking into account the role of Russia as a major investor: “IMF participation in the draft is crucially important to us,” he said.
Outlining the sequence of events for aid, and evidently playing down previous comments, Meister said: “First banks, and with them their shareholders, have to be ready to rescue the banks…If that’s not enough, the Cypriot state is next in line. Aid by euro partners comes into play only if Cyprus is demonstrably overwhelmed by the task.”
Meanwhile, Reuters yesterday reported that IMF Managing Director Christine Lagarde is not expected at tomorrow’s emergency Eurogroup meeting, prompting some EU officials to suggest the Washington-based lender may not co-finance the rescue package and will only gives expertise. The IMF declined to comment.
According to Reuters, one solution could be that Moscow contributes to the bailout if it receives the same credit status as euro zone lenders, meaning it gets repaid as a priority.

Our View: Recession has highlighted real need for NHS

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IT WAS inevitable that the queues and waiting lists at state hospital would grow as a result of the recession. Living standards have fallen dramatically, with the number of long-term unemployed increasing by the day and people in work taking pay cuts. Tens of thousands of people can no longer afford private healthcare and have no choice but to go the state hospitals for treatment even if this involves waiting for hours to be seen.
But state hospitals, health centres and outpatients’ clinics cannot were never designed to cater for so many patients. They have existed to serve old-age pensioners, the poor and public employees, while the rest of the population had to visit private medical practices; some had health insurance, others were entitled to union rates while a small minority paid out of their own pocket. Now, this group has contracted drastically, increasing the number of people seeking care at hospitals.
The Director of Limassol Hospital said the hospital had 329 beds which were always occupied while 1,500 visited the out-patients clinic every day; 700 visited the clinics at the old hospital every day. There were also very long waiting lists for certain specialist doctors in all hospitals and this, according to the new health minister was a very serious problem. The minister said that the waiting lists at Nicosia General Hospital would be tackled by buying services from private clinics, but does the money exist?
Even if it does, the proposed arrangement would simply curb the problem rather than eliminate it. The truth is that the only solution is the introduction of the national health scheme which has been on the cards for the last 20 years but no government has dared to pursue. We have been hearing about the formulation of plans for years but no government has yet dared to go beyond the planning stage.
Successive governments were terrified of undertaking such a big-scale project, fearing it would waste huge amounts of money and eventually fail. There were also different interests to contend with – unions were opposed as they would lose members who relied on the union doctors, public employees were opposed because free healthcare was a right, state doctors feared their numbers would diminish, businesses were reluctant to contribute and so forth.
No government was willing to take on a project that would cause so much trouble. But the recession has highlighted the real need for the introduction of a national health scheme, which was also a recommendation of the troika. President Anastasiades is committed to it and we hope he would not be intimidated by the enormity and complexity of the project as his predecessors were.


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