THE GOVERNMENT spokesman Stefanos Stefanou immediately seized the part about the banking sector, in Moody’s latest report downgrading Cyprus, in order to repeat the official message that the banks are to blame for economic meltdown. Stefanou almost adopted a triumphant tone, in referring to Moody’s observation that the public debt could be unsustainable because of the recapitalisation needs of the banks.
“Moody’s also note that even if measures are taken by the government it is doubtful the debt would be made viable,” said Stefanou before repeating the same old tune about the mistakes made by the bank boards and the inadequate regulations by the former Governor of the Central Bank. It is as if he was happy that the public debt would not be viable, because it would help the government’s propaganda.
Yet the truth was that Stefanou carried out a very selective reading of Moody’s report which also noted the government’s “slow response to its current grave fiscal difficulties” and its failure to act swiftly and decisively. It added that “the delays experienced in agreeing a package of fiscal and economic reforms with the troika illustrate institutional weaknesses founded on a lack of political consensus on the overall direction of fiscal and economic policy.”
In short, government indecision and procrastination have made a bad situation much worse. Time is fast running out and the government has still not prepared all its counter-proposals for the troika which would reportedly return in the latter third of October, assuming the government is ready for it. The memorandum of understanding with the troika must be signed before the November 12 meeting of the Euro Group ministers who would have to approve it before it is ratified by national parliaments. If we miss the November 12 deadline, we would receive no money until next year.
So far we have not even decided among ourselves what shape it would finally take. President Christofias still has to meet union bosses, who are vehemently opposed to the government’s proposals, followed by the party leaders on Monday. And then it would also have to negotiate with the troika that is unlikely to agree to the government’s half-baked proposals focused on higher taxes.
There was at least one positive development yesterday. Stefanou repeatedly gave assurances that the president would sign a memorandum even if he did not secure the consensus of the unions. At least this was a step in the right direction, suggesting Christofias may have finally realised the gravity of the situation and that he can no longer put off decisions. We just hope there is enough time left to finalise a memorandum by early November.