Cyprus’s plea reaches German ears

Cyprus’s plea reaches German ears

 

By Christos Meliopoulos – Nicosia

Following the saga of whether the President of the Republic of Cyprus Nicos Anastasiades had asked the troika leaders for a renegotiation of the memorandum of understanding that sealed the bailout deal for the island country, he gave an interview to the German Der Spiegel magazine clarifying once again that this was not the case.

As he stressed, in his letter to the creditors he was pointing out the serious implications to the national economy of the “unjust and bitter” Eurogroup decision to impose haircuts on depositors of the two Cypriot major banks.

His suggestion that there are measures that need to be urgently and carefully examined by the country’s creditors, in order to allow a healthy recovery, has garnered support all around Europe from the very beginning. The hardest place for the Cypriot view to be accepted is probably Germany; so the fact that Mr Anastasiades spoke to a magazine that has led the responsible coverage of the eurozone crisis in the continent’s biggest power will help bring the Cypriot message home to the Germans and hopefully win some plaudits and disperse any misunderstandings.

The view of the government in Nicosia is that President Anastasiades’ letter was received positively, once the air around it had been cleared. The bet is on whether it will manage to open the way for future talks and some alterations small enough not to raise objections by the creditors, but at the same crucial in correcting failures that needlessly inflict added pain on the Cyprus economy and people.

In creating the conditions for such a request to be granted, Mr Anastasiades is trying to create the widest possible network of allies. A Cypriot diplomat commented that his remark in the German interview about the need to focus on growth and not just austerity in order to counterbalance the effects of fiscal discipline will be received by many European leaders of the same view as a signal that Cyprus is here to help alter the policy equilibrium in the monetary union. As Nicos Anastasiades himself noted, even Germany seems to be reviewing the mix of policies implemented, albeit tentatively.

As the disagreements on the bank resolution regime have shown, Germany needs to start listening a bit more, although such an admission will probably have to wait until after the September elections.