Statement of Andros Kyprianou, General Secretary of the C.C. of AKEL on the economy
Press Office of the C.C. of AKEL, 6th December 2012, Nicosia
It seems that the attempt at distorting financial figures is a regular tactic of the Democratic Rally party and its allies.
The Deputy Chairman of the Democratic Rally party (DHSY) Averof Neophytou yesterday sought to equate the banking sector's needs with the financial needs of the state in an attempt to distort the true dimensions of the current problem.
Developments themselves appear to refute the DISY party given that the first estimates show that around € 10 billion is needed for the recapitalization of the banking sector, € 1, 5 billion to cover budget deficits and € 6 billion to refinance the debt.
How can one really equate the € 10 billion of the banking sector with € 1, 5 billion to cover the budget deficit?
In the distortion underway to refinance the debt we must clarify again that:
1. The refinancing of the public debt is not an additional debt, but the renewal of the existing debt.
2. The increase in public debt at its current level is the result of three main factors:
First, it is due to the deterioration in state revenues due to the global economic crisis. The rapid increase in non-recurring revenues in the past five years due to the boom in the immovable property sector did not continue after 2008, because of the deteriorating economic climate worldwide. Hence, the increase of the public debt is not a Cypriot particularity, but is in line with the overall trend in the European Union, as a result of the crisis.
Secondly, it was due to the need to initially bail out the Popular Bank with € 1, 8 billion which represents 10% of Cyprus´ GDP.
Thirdly, it was the outcome of the inclusion in the public debt of the loan of € 2, 5 billion or 14% of GDP which was concluded in August 2011 because of the exclusion of the Cyprus economy from the international markets as a result of the continuous downgrades of the Cypriot Economy by the rating agencies.
We remind that that the main cause of the downgradings has been the exposure of the Cypriot banking sector to the Greek economy, the investment of the Cypriot banks in Greek bonds and the inability of the Republic of Cyprus to unilaterally support its banking system because of its size, which is apparent today in the existing needs of banks.
Therefore it should be made clear that had the banking system avoided the exposure of the Cypriot Economy to the Greek bonds, but also to the Greek economy in general, had even the minimal supervision been exerted by the former Governor of the Central Bank over the operation of banks in Cyprus, the assumption of some additional fiscal and structural measures would have been sufficient to prevent the recourse of Cyprus to the European Stability Mechanism.
As AKEL, we urge all political forces to show restraint and responsibility due to the critical nature of the situation. However, most of all we call on them to put aside their electoral considerations and focus on addressing the real causes of the crisis. Only then can there be an essential solution to the economy's current problems