debt restructuring
does not help either. In the case of Cyprus, I
think that the small size of the country played
against giving rational considerations and
providing a more careful assistance package.
has been inflicted on depositors when, in reality,
the problems are due to very poor banking
supervision, which is essentially a government
responsibility.
Gold: How do you view the agreement
reached with Cyprus?
G.N.: I am looking forward to going to Cyprus
to get a first-hand idea of the precise terms of
the agreement reached with the Troika. I think
there is still a degree of uncertainty about the
final figures regarding the cost of the rescue
package, which is something I have never seen
before. I am also puzzled by the way this haircut
Gold: The decision to use uninsured deposits
in the island’s two biggest banks has been
a controversial one, not least because it has
never been done before. Was it a good idea
and do you think it will be used elsewhere?
G.N.: I do not think it is a good idea at all! I am
looking forward to obtaining a clearer picture
about why the authorities (or the Troika)
decided to move in that direction.
I am puzzled by the way
this haircut has been
inflicted on depositors
when the problems are
due to very poor banking
supervision
Gold: You have suggested in the past that
the Troika appears to ignore the possible
social effects of its crisis resolution schemes.
Did the same thing happen in the case of
Argentina?
G.N.: In the case of Argentina it was worse.
Don’t forget that we were forced to be pioneers
on this issue of restructuring the debt in this
way. For the first time we used the concept of
“debt sustainability” to calculate the haircut,
a feature that has since become standard. We
also used GDP warrants on a scale unseen
before. Prior to our crisis, haircuts were smaller
and bore no relation to the possible cash flow of
the countries involved.
Gold: Whatever the terms of the agreement,
the essential thing is that it works. Will this
Cyprus bailout do what it is supposed to?
G.N.: Again, I would like to get a first-hand
impression. I have many doubts that I would
like to clarify before answering this question.
Gold: Given that the agreement has been
finalized, are there things that Cyprus can
now do in order to minimize the effects of
the bailout and to ensur