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09/12/2016

Troika-imposed privatisation plan leaves Cyprus in the dark

Euro & Finance

Troika-imposed privatisation plan leaves Cyprus in the dark

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Rolling power cuts are taking place throughout the Republic of Cyprus yesterday (25 February) as part of protest measures by the Electricity Authority of Cyprus (EAC) against government plans to privatise semi-governmental organisations, as agreed with the Troika of lenders.

Last year, the Cypriot government agreed a deal with the so-called Troika, consisting of representatives of the European Commission, the European Central Bank and the International Monetary fund, on a €10 billion bailout.

The bailout dealed contained a commitment to privatise the Electricity Authority of Cyprus (EAC), the telecommunication authority CyTA and the Cyprus Ports Authority, which are all currently semi owned by the state.

The agreement with the Troika requires the country to raise €5.8 billion from its own sources in return for €10 billion in international loans. Cyprus plans to raise €1.4bn from selling the three semi-governmental entities.

The EAC has been threatening strike action since the government promised to pass the privatisation bill through by 5 March. The bill is currently before the House Finance Committee and is set to go to the plenary for a vote on Thursday (27 February).

The Cyprus Mail writes that the country’s parliament resembled a battle zone on Monday, as protestors from the EAC clashed with police. Two people were injured and taken to Nicosia General Hospital during the unrest.

Trouble started outside the House of Representatives on Monday morning when EAC employees sabotaged the building’s generator, causing a blackout and essentially locking deputies and House employees inside. Thousands of protestors shouting "sell-outs" and verbally abusing MPs clashed with police resulting in injuries on both sides.

In a statement, the government said it respects peoples’ right to protest but would not tolerate “anarchic attitudes which create a climate of terror”.

“Vandalism inside and outside Parliament and jeering MPs cannot and will not be tolerated. The President has called for an inquiry into the shortcomings and inadequacy shown by the police in maintaining public order and safeguarding the functioning of the House,” government spokesman Christos Stylianides said.

The government expressed its commitment to continue its economic recovery programme, because “that is the only way to return the country to growth”.

On Tuesday, the country was affected by electricity cuts.

Speaking on state radio, the Head of the Transmission System Operator (TSO) Christos Christodoulides confirmed that the power cuts started at 8.00am and were scheduled to end at 5.00pm. The electricity cuts will last for an hour each time and will affect various areas in Cyprus.

EAC president Costas Gavrielides said he respected employee's right to strike but said the protest measures should not take place at the expense of the public. Employees from semi-state telecoms company CyTA announced they would be taking part in a three-day strike beginning on Monday at midnight and ending on Thursday at midnight.

In spite of the hardship, Cyprus has put a brave face and its President Anastasiades recently said that thanks to the determination of Cypriots, the miracle of economic recovery will soon occur.

Background

The banking sector of Cyprus was badly hit by the Greek government-debt crisis and especially the ‘haircut’ in which holders of Greek governmental bonds accepted substantial losses.

Cyprus clinched a last-ditch deal with international lenders in March 2013 to shut down Laiki, its second largest bank and inflict heavy losses on uninsured depositors in return for a €10-billion bailout.

The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations in Brussels between President Nicos Anastasiades and representatives of the Troika: the European Union, the European Central Bank and the International Monetary Fund. The Troika required Cyprus to raise €5.8 billion from its own sources in return for €10 billion in international loans.

The plan will spare Cyprus a financial meltdown by winding Laiki, and shifting deposits below €100,000 to the Bank of Cyprus to create a "good bank".

Deposits above €100,000 in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki's debts and recapitalise Bank of Cyprus through a deposit/equity conversion.

Further Reading