Cyprus loan programme in doubt

19 June 2013

Cyprus loan programme in doubt

The agreement on the programme of loans for Cyprus, arrived at a mere two months ago, is now in serious doubt. This was SP Member of Parliament Arnold Merkies’s conclusion after reading the leaked brief from the Cypriot President to the Eurozone, in which he asks for the accord’s revision and the possibility of more funds. Merkies has asked the Minister of Finance in the Dutch government to clarify the situation. ‘Although these agreements have only just been made,’ says Merkies, 'Cyprus is already sowing seeds of doubt as to whether they can be fulfilled. The chance that the programme of loans will be unsuccessful and that we can kiss our money goodbye is hugely increased by this.’

Arnold MerkiesEarlier in the year the SP resisted proposals for more money for Cyprus under the conditions proposed. Although banks’ shareholders and wealthier depositors were obliged to contribute, the owners of Cypriot bonds walked away scot free. ‘So the burden of debt wasn’t properly reduced,’ Merkies explains. ‘Such a reduction is necessary in order not to do too much damage to the Cypriot economy and to get the country in condition to repay its loans. Otherwise the Greeks would be running the risk of setbacks: more and more loans, the lowering of interest rates or lengthening the term of maturity will be granted in exchange for more drastic spending cuts which will do still more damage to the economy. So it would be better to move now to debt restructuring, so that private creditors too, and not simply the taxpayer, share the burden.’

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