Inquiry blames Cypriot ex-president for crisis
NICOSIA, Cyprus (AP) — The “reckless” economic policies of Cyprus’ former president are mainly to blame for the financial crisis that brought the country to near bankruptcy, an independent inquiry concluded Monday.
The three-member panel of former judges said Dimitris Christofias also ignored warnings over excessive spending and worsened problems by delaying talks on an international bailout.
“He insisted on his views, disregarding advice and pleas by economic experts over the consequences of his actions. He had no limits,” the non-binding report said.
Communist-rooted Christofias ran the country between 2008 and February of this year. The government and the banks’ finances worsened during those years and Christofias in mid-2012 sought a bailout for Cyprus.
But he resisted conditions demanded by fellow eurozone countries and the International Monetary Fund, which waited for his mandate as president to expire in February. A deal was struck with the new president, Nicos Anastasiades, in March.
The bailout deal forced huge losses on uninsured depositors in the country’s two biggest banks in exchange for a 10 billion euro ($13.6 billion) loan. That drained trust in the banks and prompted authorities to impose capital controls to prevent a run — a first for a eurozone country.
The inquiry, which didn’t count an economist among its members, was set up in the aftermath of Cyprus’ rescue deal to apportion blame for the economic meltdown, but had no authority to instigate criminal proceedings.
Among other things, it also faulted Christofias for failing to secure a deal with fellow eurozone governments that would protect Cypriot banks from huge losses they incurred on Greek government bonds when they were cut in value in 2011.
Stelios Platis, a prominent independent economist in Cyprus, called the report “oversimplified and incomplete” in that it didn’t fully probe the role of banks and their executives in precipitating the crisis, as well as that of the central bank and the parliament.
Inquiry member Eliana Nicolaou alluded to those shortcomings, noting in her own separate statement that the inquiry should have probed the collapse of Laiki bank. It had decided not to, citing ongoing lawsuits involving the bank.
She said other key issues that needed further investigation were how the country’s debt was burdened with billions in emergency cash aid supplied to the banks prior to the bailout deal, as well as a report by audit firm PIMCO that may have overestimated the lenders’ financial needs.
Christofias has argued the inquiry was illegal and the report “fraught with untruths and slander” that offered cover to the real culprits, whom he argued were the banks.
He said in a written statement after portions of the report were leaked Friday that to pass judgment on executive decisions “is at the very least unheard of if not something that makes Cyprus an international laughing stock.”
Some 46 witnesses testified before the inquiry, including current President Anastasiades whom the inquiry castigated for not adequately preparing for the eurozone meeting where he was confronted with the deal.
Christofias’ party, AKEL, said the inquiry was part of a government-orchestrated smear campaign against its former leader and the party itself.