NICOSIA -- Nobel Economics Prize winner Chris Pissarides, who chairs the National Economic Council, warned on Sunday that parliament's failure to agree to a levy on deposits could lead to economic collapse.
In statements to the Cyprus News Agency, Pissarides said that however painful bailout agreement with the eurogroup was, it was the only chance to rescue to economy of Cyprus. He acknowledged that what the eurogroup was obliging Cyprus to do was unprecedented adding that inevitably, foreign deposits would leave the island.
"None of us expected this. The first reactions of the public and of our political representatives are absolutely justified. It is unfair for them to ask us to pay for the mistakes of a few in this way," he said. But he added "We must consider what alternative solution there is."
Pissarides said that if the law is not approved by parliament what will follow will be much worse. "There will be a lot of bankruptcies and most Cypriot depositors will lose it all because their banks will not reopen. This will happen now, in two to three days, not at some unknown time in the future. Our economy will collapse."
Asked whether it would be equally catastrophic if there foreign funds left, Pissarides said that though foreign deposits have contributed a lot, the economy was not dependent on them. The repercussions of losing them would not be as dramatic as the closure of the two biggest banks where most of the desposits of Cypriots and of local companies are.
"I believe that however painful the bailout may be, it is our only hope to save our economy from immediate collapse. We will overcome it all and see good days again, better than the ones we knew as good days because Cypriots are hardworking and know how to overcome difficulties. But first we must accept what our political leaders managed to get in Brussels to avoid a collapse so that there can be a new beginning."