Nicosia – President Nicos Anastasiades on Sunday evening urged the political parties in the House of Representatives to vote in favour of the Eurogroup decision to impose a one-off levy on deposits on the island.
In a televised address to the people, President Anastasiades stressed that he will continue the fight to change the Eurogroup decisions in the next hours to restrict the repercussions to small investors.
He also said he fully undertakes responsibility for his actions and the solution which “we have chosen is surely not the one we wanted to, but it is the least painful under the circumstances and because most of all it allows us to handle the economy ourselves”.
Anastasiades said that he will fully respect the decision of the House, which should decide bearing in mind the best interests of the people and country.
He further said what is more important is that “we are avoiding the vicious circle of a second memorandum”.
Anastasiades also said that he fully trusts the determination and decisiveness of Cypriot Hellenism and together with collective and responsible decisions we will be able to make it”.
In his address, President Anastasiades notes that “15 days ago you had assigned me with the leadership of the country. Undertaking my responsibilities, I promised that I would do the utmost to respond to the deep economic crisis our country was led into. At the same time, I was committed that with consistency and speaking the language of truth, just as I have learnt and you know me, I appeal to you without fearing the political cost”.
President Anastasiades said that at the same time, the “people and each and everyone, know that Cyprus is in a state of emergency. We are experiencing the most tragic moments since 1974. You are aware that we have undertaken a country that is on the brink of default”.
He noted that “how and who led our country to this ominous state is not a matter of the present. It is not my intention, instead of focusing on how we handle the crisis, to enter in an unnecessary discussion at this moment, as to who and how many bear the responsibility for today’s situation”.
President Anastasiades said that “with feelings of utter responsibility, I consider it my duty to inform you on the last meeting of the Eurogroup and with complete honesty to set out the real choices that were set before us at the European Council”.
He said the “first choice is that which would have led to disorderly default as a result of as a result of the ECB (European Central Bank) cutting emergency funding to maintain liquidity in the two largest banks.”
I must remind you, he added, that in December, in his address regarding the acceptance of a memorandum, the former President Mr. (Demetris) Christofias said ‘it would have been irresponsible and criminal for the island and the people’ to allow the banks’ default because it would ‘lead to the collapse of the entire economy and would bring indescribable misery to thousands of families”.
The second choice is that of a very hard but controlled and manageable situation, which would eventually lead to stability of the economy and recovery, he added.
President Anastasiades said “it is not my intention to beautify the decisions taken because I do not disregard the difficulties and possible dangers we will face”.
“It is however with a sense of historic responsibility that I took a decision, even if I completely disagreed with certain provisions”, he said, adding “I had to choose which one would cause the least painful repercussions and would secure the prospects to save the Cyprus economy”.
The choice of a disorderly default would have the following consequences:
1. A Bank would immediately cease its operation. Subsequently, the second largest bank would have to suspend its operations and finally we would have been led to the collapse of the banking system.
2. As a result, depositors would have lost immediate access to their savings while a large number of depositors would be subjected to great losses.
3. Thousands of SME and other businesses would have been faced with the risk of bankruptcy.
4. Equally significant, however, would have been the immediate loss of thousand of jobs in the banking sector. I could not disregard the consequences of the loss of thousands of other jobs that are associated with banking activities.
5. The highlight of a disorderly default would have been a possible exit from the Eurozone. A similar development would have been the devaluation of our currency and our national wealth, with everything that comes with it.
President Anastasiades said that he had to choose between his clear commitment not to accept in anyway a haircut on savings or a path, which would have led to harsher consequences for both depositors and the island’s economy.
“I want to assure that what I had stated before was completely honest and it is that which I fought for until the end. I undertook and undertake my responsibilities. The solution we have chosen is surely not the one we wanted but it is the least painful under the circumstances because first of all, it allows us to handle our economy”.
President Anastasiades said that counted to his decision, apart from the negative repercussions, which he underlined, are a number of reasons such as:
“The proposed contribution of depositors is restricted to the income from the interest which does not exceed two years.
What is most important is the fact that any contribution will be a one-off since the proposal secures in a final and irrevocable way the viability of the public debt. The next generations will also be absolved of our mistakes.
Any contribution is not a final loss for depositors who, in exchange, will receive immediately shares from the two banks on the total of their losses.
The state, acknowledging its obligations, will offer to all who will maintain their savings for a period of two years, half of the value of their contribution in the form of bonds that will be associated with the future state proceeds from natural gas.
The same decision saves provident and pension funds and averts taking any further harsh measures such as reducing wages and pensions and also the tax on financial transactions that were on the negotiating table.
The most important thing is that we are avoiding a vicious circle of a second memorandum”, he added.
President Anastasiades said that “I fully share the unpleasant feelings that such a difficult and ominous decision causes. For this reason I will continue the fight to change the Eurogroup decisions in the next hours to restrict the repercussions to small investors.”
It is clear, he said, “that the most effortless choice for me would have been the most painful for the island and the people. I have chosen the most painful decision for myself, undertaking the political cost to restrict, as much as possible, the repercussions to the economy and the citizens”.
President Anastasiades said “my decision, to have the anticipated results, requires the approval of the House. That is why I appeal to the parliamentary parties, the decision of which I will fully respect, to decide, bearing in mind the vested interests of the citizens and the country”.
He said “I hope that everyone, bearing in mind the facts as they unfolded, to take the wisest decisions”.
Concluding, the President remarked that “our path is not easy. I have complete trust in the tenacity, industriousness and determination of Cypriot Hellenism. With collective and responsible decisions, I am sure we will make it”.
Eurozone lenders on Saturday agreed on a rescue package worth at least 10 billion euro but in exchange for the rescue fund, Cyprus agreed to levy a one time tax of 9.9 percent on deposits of over 100,000 euros held in the country’s banks. A tax of 6.7 percent will be applied to anything under 100,000 euros.
The Cypriot financial assistance package is estimated at 17.5 billion, of which 10 billion will be provided by the ESM and the IMF. The one-off tax levy is estimated to yield €5.8 billion, while the remaining amount will emerge from a privatization programme, a capital gains tax increase and a 2.5% increase in the Cypriot corporate tax, currently at 10%. (CNA)