NEWS

Cyprus president prepares reshuffle

Cyprus President Dimitris Christofias ordered his cabinet to resign on Thursday, a day after the junior partner in the island?s two-party coalition DIKO asked its two ministers to step down, deepening a political crisis prompted by a munitions dump explosion on July 11 that killed 13 people and destroyed the island?s biggest power plant.

Christofias, who was chairing an emergency session of his cabinet on Thursday, was expected to announce a reshuffle though there was some speculation about snap elections being called if the new administration proposed by the president is not broadly accepted.

Wednesday?s move by DIKO was widely interpreted as a bid to force the hand of the Nicosia government which has been weakened by an energy crisis provoked by a munitions blast and by Wednesday’s lowering of the government?s credit rating by Moody?s Investor Services which also downgraded two Cypriot banks on Thursday.

Christofias requested and received the resignations of his government ministers on Thursday, spokesman Stefanos Stefanou told reporters in Nicosia.

The prospects for the Cypriot economy have nosedived since the July 11 explosion knocked out half of the island?s power generation, which some economists estimate will cost Cyprus 14 percent of its gross domestic product.

Meanwhile Moody?s has cited a ?material risk? that losses on Greek debt holdings will force the country?s banks to seek a bailout ?over the next few years.?

In its announcement downgrading Cypriot bonds on Wednesday, Moody?s cited political upheaval as the main reasons for its change in opinion

Stefanou put a brave face on the island?s prospects Thursday, declaring that Cyprus would not need to ask the EU for help as it has already covered its financing needs for this year.

“Until now Cyprus has managed to satisfy its financing needs until the end of the year. So don’t take it as a given that Cyprus will be admitted into a support mechanism,» Stefanou said.

Christofias, elected for a five-year term in 2008, has been under pressure from DIKO to create a unity government to tackle a growing political and economic crisis.

The president also faces growing criticism from the Cypriot people who have staged regular protests over the blast, blaming state incompetence for allowing dangerous munitions to be stored in unsafe conditions.

According to DIKO spokesman Fotis Fotiou, party leader Marios Garoyian took the decision to depart from the coalition in a bid ?to facilitate and accelerate decision-making and initiatives? to deal with the problems of the economy and the negative political climate following the July 11 blast. Fotiou said the move will help Christofias form a government of broader acceptance as the party had asked last week, noting ?conditions were worsening dramatically? and time was running out. ?Key initiatives and decisive efforts must be undertaken today, right now, to avert the worst possible outcome,? Fotiou said, noting that action was necessary to restore the public?s confidence as well as saving the economy.