By George Psyllides
Another financial tragedy for Cyprus was only narrowly avoided, the government said yesterday as it welcomed the approval of legislation allowing the recapitalisation of co-operative banks, after a late-night parliamentary session that at one stage had threatened to be a repeat of the fiasco in March.
“Rejection of the bills was tantamount to rejection of the recapitalisation with all the obvious effects for the future of the co-operative movement,” government spokesman Christos Stylianides said in a written statement.
The votes of opposition parties AKEL and EDEK, coupled with absent MPs from the coalition parties, saw two of 14 memorandum-related bills rejected, despite them being crucial for the release of a €1.5 billion tranche – part of the island’s €10 billion bailout – that will be used to recapitalise co-operative banks.
The first bill that failed to pass related to the transfer of the supervision of the co-operative banks to the Central Bank.
The second concerned the automatic conversion of convertible bonds into shares, a measure pertinent to the recapitalisation of Hellenic Bank.
However, after it transpired that Cyprus could be looking at a fresh seizure of deposits, the two parties did an about turn and approved the bills in a second vote early yesterday morning.
“Today would have been a black day in the history of co-ops in Cyprus; perhaps we would have lived through another financial tragedy,” Stylianides said, suggesting that rejection of the bills would have meant a seizure of deposits as in the case of the island’s two biggest banks Laiki and Bank of Cyprus.
“Even at a late stage, recapitalisation of co-op banks was ensured … without the participation of depositors,” Stylianides said. “We feel relieved by the fact that Cyprus did not embark on the same adventure as last March after the rejection of the first Eurogroup decision.”
Stylianides took a shot at AKEL and EDEK, noting that “logic and responsibility prevailed over populism” eventually.
Head of the Church of Cyprus Archbishop Chrysostomos II was furious over the previous night’s dramatic events at the legislature, which threatened to scupper the disbursement of €1.5 billion to Cyprus by international lenders, in turn endangering efforts to recapitalise the co-op movement and Hellenic Bank in which the church is a major share-holder.
Asked to comment on the long night of drama, the primate said: “What I saw (on Thursday) night is the brainless voting against (the two bills), ruled by whims and pigheadedness and not the interests of the country.
“It was an unacceptable situation and luckily they quickly realised their mistake and corrected it by taking the right decision, even if it was a little late.”
He said populism has no place in parliament, noting that the collapse of the co-operative movement and Hellenic Bank would have no benefit for the country or its people.
Passage of the co-op measures was extremely time-sensitive, as they need to be first reviewed by the individual legislatures of eurozone nations before they are put to the next meeting of EU finance ministers on September 13.
The rejection of the bills by a show of hands sounded the alarm in the government camp, with Stylianides and Finance Minister Harris Georgiades scrambling to parliament.
DISY chief Averof Neophytou urged MPs to stay put for the good of the country, as parties tried to iron out what appeared to be a face-saving compromise.
The two contentious bills finally passed in a second vote, by 41 votes for and just three against.
The text of the legislative proposals was virtually identical to the original government bills.
A few words were changed to allow the bills to be put to the vote for the second time, while AKEL received a couple of pledges.
Social media sites twitter and facebook quickly filled with criticism and abuse directed at parties, especially main opposition AKEL.
Observers suggested that AKEL and EDEK rejected the bills because they expected them to be passed anyway with the votes of the government coalition parties.
This would have allowed the two parties to take the ‘moral high ground’ while others paid the cost of unpopular decisions.
However, AKEL leader Andros Kyprianou rejected suggestions it had acted irresponsibly “as some people are trying to present us”.
Kyprianou said AKEL’s about turn was the result of certain pledges made by the government and amendments to the bills.
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