Cyprus President Nicos Anastasiades is on an official visit to Athens where he hopes to convince Greek officials to agree to ring-fencing the “bad bank” operations of the island’s two main lenders that are exposed to nearly €25 billion worth of Greek debt.
Saying that the Cyprus economy was in a “state of emergency”, Anastasiades called political party leaders and his closest economic advisors to the Presidential Palace on Saturday night asking all sides to take a share of the burden he inherited last month form a bankrupt communist administration.
The president said that the Troika of international lenders from the European Union, the European Central Bank and the IMF were insisting on a number of conditions in order to release a 10 bln euro bailout and to avoid a haircut on Cyprus bank deposits.
He added that without any recapitalisation, the local banks, and the nationalised Popular Laiki, would survive the most until the end of March.
Anastasiades said that all parties would have to agree to some form of privatisation of about seven public services and utilities, without necessarily being sold off to foreign investors. These would take about two years, but at the first stage would focus on restructuring these services as government-owned or publicly-owned companies.
Four consultancies will be hired for the due diligence on these services.
The Troika also wants to raise the tax on dividends from 20% to 30%, and the tax on interest from 15% to 30%, as well as a “rich tax” on earnings beyond €120,000.00 a year rising from 30% to 40%.
Also, there is a prospect of the corporate tax being raised from the competitive 10% which has been the demand of EU paymaster Germany to 12.5%, probably from January 2014.
During the meetings in Athens, President Anastasiades and Finance Minister Michalis Sarris will try and persuade officials of the central Bank of Greece to agree to split the debt-laden Greek assets of Bank of Cyprus and Laiki into a “bad bank” in order to be able to secure a bailout from the Greek bank rescue fund, allowing the home operations in Cyprus to reduce their recapitalization needs.
Written and published by the Financial Mirror. Copyright 2013, all rights reserved.