Author:
George Psyllides
BRUSSELS said yesterday it was still waiting to receive Cyprus’ counter proposals to the austerity package proposed by the international lenders, the troika.
Nearly two weeks after Eurogroup President Jean-Claude Juncker told Cyprus in no uncertain terms that it it must speed up negotiations with the troika for a bailout deal, the European Commission said yesterday it was still waiting.
Commission spokesman Olivier Bailly said no date had been set for the troika’s return to the island.
“We are waiting for a formal response and proposals from the Cypriot authorities on various policy options of a draft Memorandum of Understanding,” Bailly said.
Cyprus applied for assistance in June but has been accused of stalling on finalising a deal given its opposition to the troika’s proposals, particularly the broad cuts across the public service, privatisations and pension reforms.
The government also wants to run its counter proposals by the unions, one of which yesterday said there would not be enough time for a proper dialogue. It was estimated that the troika would return to the island in the first ten days of October and wrap up negotiations with the government by the end of the month.
Labour Minister Sotiroulla Charalambous yesterday reiterated that the government was finalising the counter-proposals after which they would be discussed with the unions and the political parties.
It was the same message the government gave out two weeks ago but Charalambous rejected suggestions of a delay.
“At the moment we are finalising some of our counter-proposals, which are based on the axis we defined from the first moment,” Charalambous said.
The minister said the effort was to continue with the economic consolidation in a balanced manner so as not to kill growth and without hurting vulnerable groups.
The minister could not say however when the package would be ready, neither could she say when the dialogue would start.
She did not rule out a single discussion involving all concerned parties. “My personal view is that if necessary I do not see why this cannot happen,” she said.
Opposition DISY asked yesterday where the government would find the money in the meantime to meet its obligations as the end of the year approaches.
“When will we be able to receive the first tranche for our fiscal needs, to pay wages, pensions and allowances in November and for the subsequent months, and to recapitalise our banks,” DISY deputy chairman Averof Neophytou said.
“We are honestly wondering when the government will have its counter-proposals ready? When will the dialogue with the parties and the social partners take place?” Neophytou added.
The DISY number was suggesting that time was running out given that if there is an agreement with the troika, it would then have to be put to the eurozone parliaments for approval. “The suffocating timeframes are running out and the government must also take into consideration that beyond all other difficulties, running out of time weakens our negotiating position,” Neophytou said.
The leader of SEK, a trade union affiliated with the right, was also concerned saying there would not be enough time for talks. “There is a huge delay. If the aim is to have a memorandum that would be socially acceptable there must be reasonable time for dialogue,” Nicos Moiseos said.
However, Glafcos Hadjipetrou, the boss of the all-powerful civil servants’ union PASYDY suggested yesterday that Cyprus must do everything it could an to avoid a memorandum of understanding with the troika.
In an interview with web-based Stockwatch, Hadjipetrou blamed the banks for the situation and he claimed that the problems in the economy were manageable. “Cyprus’ banking system must be refinanced directly,” he said.
Hadjipetrou was referring to a recent decision by the EU to allow its rescue fund, the ESM, to recapitalise banks directly.
The aim of direct recapitalisation was to break the debilitating link between indebted governments and troubled banks - making sure that a government that is pursuing sound economic policies is not dragged down by its mismanaged banking sector.
But that is unlikely to happen any time soon, if at all, judging from developments in Europe.
The dispute between four AAA-rated eurozone countries on one hand - Germany, Finland, the Netherlands and Austria - and indebted states such as Ireland and Spain on the other, threatens to undo or severely set back efforts to allow banks to be directly recapitalised by the eurozone's rescue fund.
Germany, Finland and the Netherlands gave rise to the confusion with a joint statement on Tuesday setting out the conditions under which they would be prepared to allow the rescue fund, called the ESM, to recapitalise banks.
But rather than sticking to the wording from the summit in June, when countries agreed that the ESM would be able to directly recapitalise banks once an "effective single supervisory mechanism is established", the three countries added an extra stipulation in their statement saying:
"The ESM can take direct responsibility for problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities."
Austria joined the three yesterday, saying there was no question of the ESM being allowed to assume old, bad debts.
The critical phrase is "legacy assets", which appears to imply that the debts of struggling Spanish and Irish banks - and potentially those of Greece and Cyprus too - will remain the responsibility of the respective governments, rather than being assumed by the ESM during the recapitalisation process.
Labour Minister Sotiroulla Charalambous