Report blames ex president for near meltdown of Cypriot economy

A judiciary committee investigating the reasons for the near-meltdown of the Cyprus economy earlier this year laid the blame squarely on ex-president Demetris Christofias and his left-wing AKEL party in a report released on Monday. "Considering the testimony placed before us in its totality, we concluded that the first and main culpable for the situation which led the economy of the country to the brink of insolvency is ex-president of the Republic Demetris Christofias," said the report read by the committee's president George Pikis, a former High Court president. It said Christofias and his government took away from the Central Bank of Cyprus its responsibility to control the public debt and led the economy into runaway deficits which shut out the eastern Mediterranean island from international markets since May, 2011. Christofias and his AKEL left wing party were in government from 2008 until early 2013. The 178-page report said Christofias disregarded advice by ministry of finance bureaucrats and systematically turned the budget upside down to serve his policies of giving out benefits to sections of the population. "It is reasonable to conclude that the president and the government functioned with the mantra 'I'm in government, I do what I like,'" said the report of a three-member panel. "He had no concept of his limits," the report said of Christofias' tactics in disregarding advice. Cyprus was forced to request a bailout from the Eurogroup and the International Monetary Fund in June, 2012. The inquiry panel blamed the former president for unduly delaying to conclude a bailout deal thus contributing to the inflation of the sovereign debt. Instead of applying to Cyprus' Eurogroup partners for assistance, Christofias turned to Russia for a 2.5-billion-euro (about 3.4 billion U.S. dollars) loan at an interest rate of 4.5 percent. The loan was only recently restructured so as to be repaid over a longer period at an interest rate of 2.5 percent. Christofias, who had refused to testify before the panel because it did not allow him to read a lengthy statement setting out his positions, dismissed the report as unfounded and politically instigated by the right-wing government that ousted AKEL in a landslide presidential election victory in February this year. Christofias accused the panel of ignoring what he considered to be the main causes of the crisis -- the greediness of bankers and an ineffective governor of the Central Bank with who he was constantly at loggerheads. "It is an illegal committee which drafted a text laced with untruths and slander," he said in a statement. AKEL's chief also decried the committee's report, claiming that it was driven by political expediency. "I do not know of any other country which appointed a committee to apportion political blame," said Antros Kyprianou, the party's Secretary General. Monday's report painted a picture of complete indifference by the former president and his government for the consequences of their economic decisions, which turned a budget surplus when he assumed power into a widening deficit and inflation of the sovereign debt. The report also mentioned Christofias' decision to accept a write-down of Greek government bonds by about 75 percent without giving thought to the fallout on Cypriot banks. As a result of this decision the banks suffered a total loss of 4.5 billion euros and Cyprus was forced to apply for bailout when the banks requested state assistance to recapitalize. The resulting 10-billion-euro bailout deal included a recapitalization of the banks by using uninsured deposits of over 100,000 euros in Bank of Cyprus, the largest bank in the country, which forced the once-thriving Cypriot banking system down on its knees. The report also said that former center coalition DIKO and socialist EDEK parties were responsible for the crisis, because they participated in the government for up to three years but did not disagree with its policies. Current president Nicos Anastasiades was also blamed by the report for not preparing adequately before going to a Eurogroup meeting, just 15 days after assuming power. It said Ananstasiades did not anticipate decisions which were not hard to foresee -- including the unprecedented haircut on bank deposits, which has since been adopted by the Eurogroup as a standard method of recapitalizing banks in trouble.