FINANCE Minister Vassos Shiarly yesterday sought to put to rest talk that international lenders wanted to harm Cyprus, reminding that they would be providing the island with much-needed funds it could not get anywhere else.
“I do not believe the troika is coming here to harm the economy if this is the message some people want to give. It is not the case,” Shiarly told the state broadcaster.
To secure the cash, Cyprus must agree to certain conditions – an adjustment programme which includes measures, especially concerning the public sector, that have prompted the reaction of unions.
They are coming to finance Cyprus at a rate of 2.0 to 3.0 per cent “which we could not find any other way,” Shiarly said.
High bond yields have effectively shut Cyprus out of international markets since May 2011.
The government secured a €2.5 billion loan from Russia at the end of 2011 but the heavy losses incurred by the island’s biggest banks after the Greek debt write-down forced it to seek assistance from its EU partners in June.
The minister acknowledged that people were worried about certain conditions recommended by the troika.
“We also worry about some of the recommendations (but) all this can be resolved in a serious negotiation,” Shiarly said.
The minister said he expected talks with the lenders to start next week after the government finalises its counter-proposals over the weekend.
After dragging its feet for a couple of months, the government is now scrambling to meet a November 12 deadline or risk running out of cash.
After November 12 - the next meeting of the Eurogroup - it would take the parliaments of individual eurozone nations about six weeks to sanction the Cyprus memorandum.
Meanwhile, Standard & Poor's on Wednesday downgraded Cyprus three notches to "B" from "BB" with a negative outlook, saying electoral considerations contributed to "policy inertia".
“It does not please us at all but it’s a fact that developments do not help the Cypriot economy,” the minister said. “We should not be surprised each time there is a negative assessment.”
It was not a chance that the opposition would miss.
“The new downgrade reflects the dire reality,” DISY spokesman Haris Georgiades said. “Cyprus’ creditworthiness has deteriorated because the government has not yet negotiated a support package while external and fiscal risks have increased.”
Georgiades said the government would now have to negotiate under suffocating timeframes brought about by its inaction.
“We hope that the government, realizing the hard reality, will eventually present the troika with a reliable and effective package,” DIKO spokesman Fotis Fotiou said.
Ruling AKEL said the downgrade had been expected but denied that the reason was the delay in striking a deal with the troika.
“As the reason for the downgrade, the agency repeats the crisis of the banking system and the possibility that the need to support it would raise the public debt to an unviable 130 per cent of GDP by the end of 2013,” AKEL spokesman Giorgos Loukaides said.
At the same time the state broadcaster reported last night that the government has modified its proposals for savings in the public sector with greater salary cutbacks. It said that salaries between €1001 and €1500 would be slashed by 6.5 per cent (instead of by 5 per cent); from €1501 to €2000 by 8.5 per cent; from €2001 to €3000 by 9.5 per cent; €3001 to €4000 by 11.5 per cent (instead of by 11 per cent); and €4000 and over by 12.5 per cent (instead of by 12 per cent). No cuts will be made to salaries under €1000.
Vassos Shiarly