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South Cyprus: The real scale of the disaster

12 April 2013

It appears that the true nature of the scale of the economic collapse in the South is finally being realised.

While the previous administration under Demetris Christofias attempted to cover up the enormity of the financial mess and refused to cooperate with their EU rescuers, the current government has not acted much better.

The most recent measure of the bailout required has jumped from 17.5 billion euros to 23 billion euros.  The troika of the EU, IMF and World Bank are committed to a bailout of 10 billion euros, so the remaining 13 billion euros has to be wrung out of the faltering Greek Cypriot economy.

In the face of the enormity of this latest figure, the Anastasiades government has continued the dithering and soft soaping the public as did the previous administration.

President Anastasiades has made a number of television appearances attempting to reassure the public. However, there has been no attempt to explain this rapid deterioration in the financial condition of the country and what measures will be required to improve it. Most of the energy of the recently elected politicians has been spent on blaming their opposite numbers in the previous government.

In addition, there has been an enormous amount of tinkering, such as the weekly changes in capital controls and inquiries into people who took their deposits out in March before they were frozen and so on.

These are not the acts of a government that has the expertise or desire to deal with the bailout.

Unfortunate Laiki bank depositors will be expected to stump up 10.6 billion euros, gold reserves will be sold to raise 400 million euros but that still leaves a large gap which will have to be met by increasing taxes on anything the government can tax.

As an example of how hard the government is finding it to impose austerity measures, one needs to look no further than the ailing Cyprus Airways. The majority state-owned airline company made a loss of 55.8 million euros in 2012 following a loss of 23.9 million euros in 2011.

Proposals had been put forward to reduce staff from 1000 to 350, reduce salaries by 17% and reduce the fleet from ten to six aircraft.

However, Cyprus Airways’ largest union, CYNIKA-SEK has rejected all the restructuring proposals. Union chief Andreas Pierides said that the proposals needed substantial improvement.

In the meanwhile, there is an EU investigation underway, looking into whether 100 million euros of state assistance for the state airline, complied with EU laws.

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