cyprus
A euro exit would be
suicide unless the
financing of such an
exit is secured.
mechanisms to ensure that these companies do not operate against the public
interest, regardless of ownership. One
thing must be made clear: unless the stateowned companies generate some €1.5
billion by 2018, over and above all state
revenues from taxation, levies and social
security, measures of an equal amount will
be imposed on the Cypriots. This is the
subject of the debate – not the prospects
of these companies under their current
management. Let us not forget that Cyprus
was ready to trade most of the nation’s
future gains from its hydrocarbons, it was
ready to contribute the reserves of the pension funds and, at the same time, there is
concern about the outlets through which
partisan clientele politics pass! Where is the
concern about the pensioners, the unemployed, the future generations?
Gold: Some of the main political parties,
as well as some local businessmen and
international analysts, argue that Cyprus
should abandon the Memorandum with
the Troika and find a solution to its financial problems outside the context of
the euro. What is your view?
G.P.:. Leaving the euro before Cyprus
has fully recovered and grown prosperous would, in my view, be catastrophic.
Moreover, the stance of the international
community during the critical two weeks
of March, showed that, with the island still
divided, the very existence of the nation
is in jeopardy outside a supra-national organisation. The cost to the Cypriot people
of a euro exit would be insupportable. I
hope the champions of the euro exit have
a plan for coping with the geopolitical issues, as well. I will refrain from getting into
a discussion about how the new currency
would perform (devaluation), how imports
would be supported, where the values of all
assets would end up in the case of an exit
from the eurozone. We only need to take a
look at the books, as an accountant would.
If Cyprus wishes to leave the association of
which it is a member, its books need to be
balanced. They contain €15.5 billion of
public debt, €11.2 billion of ELA and €2
billion of state guarantees. A total of over
€28 billion compared to a GDP of €17
billion. This figure is with no provision
for the banks, which will be hit further.
How on earth would this settlement be
financed? In my view, a euro exit would be
suicide unless the financing of such an exit
is secured.
Gold: What would the political cost be
if Cyprus were to exit the eurozone?
G.P.: I’m afraid that, any discussion about
Cyprus leaving the eurozone brings with
it a hasty and forced decision about the
national problem of the divided island.
Politically, I cannot see how the cost could
be any less than catastrophic, as long as
the 39-year old national problem remains
unsolved. The Cypriot people must have
realised all these years that morality and
geopolitics are often mutually exclusive.
Gold: Are there practical steps that can
be followed in order for Cyprus to exit
the Memorandum? Is it possible?
G.P.: The Memorandum per se is a
mutually agreed upon set of measures and
actions that need to be implemented to ensure that Cyprus is in a position to finance
its economy by itself by 2018 – either by
its own means or by securing financing
from lenders other than the Troika. In that
sense, a roadmap that achieves the same
goals with measures and actions that have
a more bearable impact on society would
be more than welcome. The key is not the
Memorandum itself – it is the achieve-
42 Gold the international investment, finance & professional services magazine of cyprus
ment of the goals. The €10 billion loan
agreement simply does not exist in the
absence of a credible plan, no matter who
the father of such a plan is. An alternative Memorandum is possible but I doubt
whether it would be much different from
the agreed one. Besides, Cyprus had nearly
two years to develop such an alternative
plan and came up with next to nothing
when it was really needed. If your question
means “with no Memorandum at all”, we
come back to the underlying issue of who
will finance Cyprus.
Gold: What conditions need to be met
before Cyprus can be optimistic about
its future?
G.P.: The major risk for Cyprus is not
economic – it is moral a