Cyprus’s cash-strapped government had to get loans from state-owned companies to make sure it could pay its own workers’ salaries during the holiday period, officials said on Monday.
Finance Ministry Permanent Secretary Christos Patsalides had urged three big companies to agree to lend 250 million euros from their pension pots in order to prevent a meltdown of the states finances. All three indicated that they would be willing to do so.
“What would be the outcome if these additional financing needs aren’t secured? We’ll be talking about the state declaring a suspension of payments in the next few days,” Patsalides had told the Parliamentary Finance Committee before the companies agreed to the loan.
He said the loan would allow the government to continue paying salaries until the end of February, by which time the country expects to start receiving money from a bailout agreement it is finalizing with the troika of the European Commission, the European Central Bank and International Monetary Fund.
Patsalides said the troika had suggested that the government turn to state-owned companies to cover the fiscal shortfall.
Were Cyprus to default on its salary payments, credit rating agencies would cut the country’s debt grade to “selective default,” in turn harming the companies themselves, Patsalides said.
Some union leaders criticized the government for going after their pension savings and expressed fears that they may never see the money returned.
Others asked that the government provide iron-clad guarantees that the money will be redeposited in their pension funds. Still, the Telecommunications Authority and Ports Authority said they would agree to lend the government 100 million euros and 38 million euros respectively in light of the dire situation the country finds itself in.
Officials from the pension fund of the Electricity Authority, which had the most misgivings, relented late on Monday and said they would also lend the government 100 million euros. [AP]