The search for jus­tice in Cyprus

Financial Mirror (Cyprus) - - FRONT PAGE -

Cypri­ots are angry and you can’t blame them. They have been through one of the worst eco­nomic rip-offs in his­tory. Their bank ac­counts have been raided. Their ma­jor in­dus­try has been de­stroyed. Un­em­ploy­ment is at record lev­els. Cyprus is es­sen­tially gov­erned by for­eign tech­nocrats. For all this, Cypri­ots have to ap­pear grate­ful, liv­ing in fear that their next hand­out from the Eurogroup might be de­nied.

There is a feel­ing that some­one should be pun­ished. The banks ap­pear to be at the cen­tre of cur­rent in­ves­ti­ga­tions. Who bet­ter? They were at the cen­tre of the eco­nomic dis­as­ter. But hold on, what hap­pened to the other in­ves­ti­ga­tions into the fi­nan­cial cri­sis? For ex­am­ple, The Pikis com­mis­sion of in­quiry into the Fi­nan­cial Cri­sis ex­tended over many months, record­ing the tes­ti­mony of scores of wit­nesses in open ses­sion.

The bankers and their shady loans and loan for­give­ness had a prom­i­nent role in th­ese in­ves­ti­ga­tions. But the main blame for con­tribut­ing to the fi­nan­cial cri­sis was re­served for our politi­cians.

In re­port­ing their find­ings on the fi­nan­cial cri­sis, the Pikis com­mis­sion of in­quiry into the fi­nan­cial cri­sis cer­tainly brought for­ward ev­i­dence of pos­si­ble charges against banks and bankers. How­ever, in their clos­ing sum­mary (Septem­ber 2013) the judges of the com­mis­sion saved their harsh­est con­dem­na­tion and placed po­lit­i­cal re­spon­si­bil­ity for the fi­nan­cial cri­sis on for­mer Pres­i­dent Christofias, his ad­vi­sors and the po­lit­i­cal par­ties which sup­ported his gov­ern­ment.

We some­times lose sight of the fact that prob­lems with banks dur­ing this pe­riod was not some­thing unique to Cyprus. Other coun­tries also had banks on the verge of bank­ruptcy dur­ing the fi­nan­cial cri­sis. Ger­many, France, Bel­gium, Bri­tain, Spain, Hol­land, Italy, Aus­tria, Latvia, Den­mark are just some of the other Euro­pean coun­tries with banks in dis­tress dur­ing this pe­riod.

But there was a ma­jor dif­fer­ence. Th­ese coun­tries were them­selves able to find the re­sources needed to res­cue their banks. None of them had to re­sort to the Eurogroup for fi­nan­cial as­sis­tance and all that came with it. Cyprus was dif­fer­ent.

Hav­ing in­her­ited a na­tional debt 8.3 bln euros in 2008, the Christofias gov­ern­ment em­barked on a spend­ing spree which nearly dou­bled this amount within the space of four years (15.4 bln debt in 2012). The rapid in­crease in debt was re­lated to and ac­com­pa­nied by the ex­clu­sion of Cyprus from in­ter­na­tional fi­nan­cial mar­kets. A 2.5 bln euro loan from Rus­sia was wel­come but in­ad­e­quate. With in­suf­fi­cient funds and un­able to bor­row in­ter­na­tion­ally, the gov­ern­ment was un­able to pro­vide the banks (mainly Laiki) with the fi­nan­cial as­sis­tance they re­quired. The Eurogroup and its aus­ter­ity mea­sures was the only re­main­ing op­tion.

When the Cypriot gov­ern­ment fi­nally saw the im­pend­ing dis­as­ter, it was too late. The Christofias gov­ern­ment tried to find the nec­es­sary fi­nance , but after its spend­ing binge, the cup­board was bare. In­stead of ask­ing the Eurogroup for help in early 2012, the gov­ern­ment pro­cras­ti­nated, stalling un­til the next elec­tion. Dur­ing the lat­ter part of 2012, the prob­lem be­came much worse. Laiki bank in par­tic­u­lar sank much deeper in debt (to an amount even­tu­ally greater than 50% of Cypriot GDP) and the rest, as they say, is his­tory.

To­day we seem to be fol­low­ing a fa­mil­iar path. As hap­pened in the case of the Mari dis­as­ter, the un­com­fort­able re­sults of pre­vi­ous in­ves­ti­ga­tions are ig­nored. More in­ves­ti­ga­tions are com­mis­sioned. Time passes.

The is­sues be­come in­creas­ingly vague. Pub­lic in­ter­est de­clines. A weak, un­sat­is­fac­tory judge­ment fi­nally emerges. To quote Yogi Berra “Its deja vu all over again”.

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