Greece’s government spokesman described on Monday the 10-billion-euro bailout agreement between Cyprus and the troika as “painful” for Nicosia but expressed confidence that the island’s economy could recover.
Speaking several hours after the deal was reached in Brussels, Simos Kedikoglou suggested that Cyprus faced little choice but to accept significant losses for large depositors as part of an effort to overhaul its banking system.
“The agreement stops the slide towards a eurozone exit and the chaos that would come with that,” said the government spokesman.
“Cyprus has produced miracles many times. It will do it again,” added Kedikoglou. “It has the ability to make use of its unique position and its wealth-producing resources to return to prosperity and growth soon.”
In his statement, he also warned that other countries should not seek to take advantage of Cyprus’s economic weakness. The comment comes after the Turkish Foreign Ministry warned on Saturday of a “new crisis” in the Mediterranean if Cyprus collateralizes gas revenues as part of plans to form a solidarity fund.
SYRIZA condemned the agreement in Brussels, where it said that Cyprus had succumbed to “blackmail” and “threats.”
It criticized the Greek government for failing to show solidarity for Nicosia and accused southern Europe of “shooting itself in the foot” by failing to form a united front against the idea of a depositor bail-in.
In his speech to mark Greek Independence Day on Monday, President Karolos Papoulias described the agreement between Cyprus and the troika as “intolerable” and “selective”
The deal foresees the winding down of Cyprus Popular Bank (Laiki) and restructuring of Bank of Cyprus. The resolution of Laiki will see uninsured depositors (those with more than 100,000) lose most or all of their money.
Depositors with more than 100,000 euros in the Bank of Cyprus also face a substantial haircut, expected to be between 30 and 40 percent.
The healthy part of Laiki will be merged with Bank of Cyprus, which will also take about 9 billion euros in European Central Bank funding from the defunct lender.
Cyprus is set to begin receiving its bailout instalments in May.