President of the Republic Nicos Anastasiades has said we were put a gun to the head to accept the haircut of deposits in accepting the terms for a bailout to save the Cyprus economy.

Testifying before the Commission of Inquiry, which convened in its last session, Anastasiades said that he argued before the Eurogroup meeting of 15th March that Cyprus had suffered heavy income losses following the Turkish invasion of 1974 and has since been divided as Turkish troops occupy 37 percent of its territory.

However, this argument was toppled by the excellent results which the government controlled areas of the Republic exhibited, thus making the country eligible for accession to the European Union and the Eurozone.

“The decision had already been taken” said Anastasiades, adding it began to take shape during G20 summits and it was adopted at some point by the EU and “unfortunately due to the fact that measures were not taken on time, some had believed it was the right time to impose it” even though it was never tested.

The bailout agreement for Cyprus included an unprecedented one-off levy on bank deposits to raise 5.8 billion euro, providing for 6.75% on deposits less than 100,00 euro and 9,9% on deposits over this amount.

President of the Commission, George Pikis, asked Anastasiades if the option of requesting the opinion of the Court of Justice of the EU on the haircut of deposits was ever raised. The President of the Republic said “referring the issue to the Court would have meant more time and the pressure here was at maximum”.

He said Eurogroup leaders were trying to deprive him of the right to return to Cyprus to negotiate with political leaders and the expert committees set up and to evaluate the results of the meeting of the then Finance Minister Michalis Sarris with his Russian counterpart in Moscow.

“They were calling for the House of Representatives to convene on 17 March and to approve the Eurogroup’s decision, otherwise the banks would have remained closed, something that did happen, adding that “the pressure exerted was unprecedented”.
To a remark by Pikis that this is described as “putting a knife to the throat”, President Anastasiades said “it was rather putting a gun to the head”.

Anastasiades said that the first argument he put forward was that because of the Turkish invasion and the occupation of more than 70% of its productive resources, as well as the destruction of the island’s economy in 1974, the recovery of the economy depended, to a great extent, to its financial services and banking sector and this explained the large banking sector in relation to other EU countries.

The President said he told European leaders that due to its location, size and other characteristics of its economy, Cyprus could not have a comparative advantage with other sectors of economic production and depended mainly on tourism, financial services and maritime and if there are problems in these sectors these must be corrected with the cooperation of EU members instead of opting for extreme solutions.
He said the Cyprus delegation went to the Eurogroup meeting “sufficiently prepared” and he had pointed out the need for EU partners to exhibit solidarity, a fundamental EU principle and that “Cyprus was not asking for special treatment but rather equal treatment”.

The President also put forward the argument over possible systemic consequences to other EU members, the positive prospects of the Cyprus economy due to the hydrocarbon reserves within the country’s EEZ and the interest by multinational companies over the energy reserves.

Anastasiades also told the Commission that he had referred to the responsibilities arising from the Greek haircut underlining that it was “unfair for Cyprus to take on a disproportionate burden compared to other countries”.

He also told Pikis that Germany, the Netherlands, Finland, Austria and Slovakia were fully aligned with the views of the International Monetary Fund (IMF) while Greece was trying to help but it was itself in a difficult position.

Asked by Pikis if the government had prior knowledge of the possibility of haircut to the deposits, President Anastasiades said that the legislation prepared by the Ministry of Finance was not related to the Eurogroup decision.

Cyprus agreed with international lenders on a 10 billon euro aid package under which it closed one bank, the Popular, whereas deposits with more than 100,000 euros held at the euro zone state`s biggest lender, Bank of Cyprus, lost 47.5% of their value, after being converted into bank shares.

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