The search for justice in Cyprus
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”.