By Kyriacos Kyriacou-Nicosia
Warnings that a rejection of the foreclosures bill by Parliament could lead the Cyprus economy “back to March 2013” and possibly a new haircut on deposits has caused panic among depositors.
Local newspaper Phileleftheros reported that that approximately €60 million of deposits were withdrawn from local banks in a single day immediately following Chairman of the National Economic Council (NEC) Christoforos Pissarides’ comments on Tuesday, made after a meeting with President Nicos Anastasiades. Pissarides said that a rejection of the bill would be “disastrous” for the economy and that a new haircut on deposits may be decided.
The newspaper also reported that while normal outflows from banks typically do not exceed €100 million per month, last Wednesday saw €45 million withdrawn from commercial banks and €15 million from the co-ops.
Meanwhile, daily Simerini reported on Saturday that banks consider themselves victims of an overzealous effort by Anastasiades’ advisors to push for the approval of the foreclosures bill.
Bill discussion postponed
At the same time, it was announced that the House plenary, scheduled to convene next Monday to discuss the foreclosure bill, was postponed until the end of next week, and possibly until Friday, September 5th. Political parties said that they will not vote for the bill as it is, suggesting changes, which according to the government were not accepted by troika. Last week the President had contacts with political leaders to convince them to approve the bill. It is worth saying, that the adoption of the foreclosures bill is a government commitment to troika in order for the country to receive its next tranche as part of the euro bailout program.
In March 2013, Cyprus reached an agreement with its Eurogroup partners to split the country’s second biggest bank, the Cyprus Popular Bank (also known as Laiki Bank), into a “bad” bank which closed over a few months and a “good” bank which was later on absorbed by the larger “Bank of Cyprus”. In return for a €10 billion bailout from the European Commission, the European Central Bank and the International Monetary Fund, the Cypriot government imposed a significant haircut on uninsured deposits, a large proportion of which were held by wealthy Russians who used Cyprus as a tax haven.]Insured deposits of €100,000 or less were affected. Restrictions on withdrawals were also decided to keep the banks alive, but later on the measures were loosen to prevent the suffocation of businesses and generally the market. Fears of a new haircut people withdraw their savings from banks and hide them at home.
Banks are “dead”
Many here in Cyprus believe that the island’s banks are already “dead” as deposing and lending has stopped.
Hellenic Bank announced Friday losses €95,5 million (after taxation) for the six-month period ended 30 June 2014, compared to losses of €46,1 million in the corresponding prior year period.
Bank of Cyprus, the island biggest lender continues efforts to recover. The Extraordinary General Meeting (EGM) of the shareholders of Bank of Cyprus approved by a majority vote on Thursday the increase through the placing and the open offer of the share capital by € 1 billion.