Politicians, trade unionists, analysts and business people are complaining that democracy had been circumvented
Cypriots have reacted to the news of their own salvation from economic meltdown with relief – but also trepidation and despair.
In the streets and cafes of Nicosia, and on television chatshows aired in homes across the nation state, Monday's message was the same: "We have been saved but at what cost?"
An agreement had finally been reached, ending days of uncertainty over Cyprus's membership of the eurozone, but like a wounded animal the country had been left bleeding, its people staring into the future with fear. The interior minister, Socrates Hasikos, encapsulated the mood, describing the European Union and International Monetary Fund-backed bailout as the best of a very bad bag of choices.
"We had got to the point where we were discussing a [depositor] haircut of between 50% and 60%," he said, adding that the Cypriot parliament's rejection of the first accord, with its highly controversial levy on depositors big and small, had been hugely negative for the country's banks. "So this is the best we could get."
After Monday's deal, banks – closed since the outbreak of the crisis 10 days ago – will almost certainly reopen on Tuesday, he said. Within hours of the agreement being brokered, it was quite clear that Hasikos's view of the island's quest to keep bankruptcy at bay was not unanimously shared. In averting a potentially disastrous disorderly default, the deal had kept war-partitioned Cyprus in the family of euro nations – long seen as a geopolitical benefit for a nation divided between Greeks in the south and Turks in the north since 1974.
But overnight everything had changed. In accepting what was on offer from the EU and IMF, the Cypriots had also agreed that nothing would be the same again: the €17bn (£14.4bn) bailout had come with the price of dismantling their economy as an offshore financial centre and reconstructing it from the bottom up. Unemployment, business closures and recession inevitably loom.
Across the board, politicians, trade unionists, analysts and business people decried the manner in which the agreement had been sealed. In the confusion of a deal whose details remained elusive, many complained that, once again, democracy had been circumvented – with Nicosia's 56-member parliament having no say over an agreement that had ultimately been drawn up in Brussels.
"It is illegal and undemocratic," said Christos Tombazos, general secretary of the Pancyprian Federation of Labour. "We're talking about massive changes to the banking system. It should go to referendum for the Cypriot people to decide."
Even worse, said the communist party, Akel – which navigated the crisis until it was ousted from power in elections last month – the bailout had sown the seeds of the island's destruction by enforcing losses not only on wealthy depositors with holdings of over €100,000, but imposing capital controls and closing, Laiki, the country's second largest bank. "A collective punishment has been inflicted on the people of Cyprus and not the bankers whose criminal decisions brought us here," said Giorgos Doulouka, Akel's spokesman. "Transforming the banking system could have been done in an alternative way, on a long-term basis, and not through shock therapy which will be disastrous for the economy and the people of Cyprus."
With the backing of Akel, the island's powerful trade unions promised mass protests in the days ahead. "We've lost a lot of sleep," said Panaghiotis Angastiniotis, who has run a factory in Nicosia that supplies raw materials to the construction sector for nearly 40 years. "We do all our business through Laiki and I have no idea, now, if we'll be able to maintain our credibility and go on paying suppliers."
As in Greece, Cyprus now seems adrift on a wave of angst with many worrying that austerity demands, also being made by the EU and IMF, will push the electorate to political extremes.
Joblessness, already at a record 15%, is expected to soar as the centre-right president, Nicos Anastasiades, moves ahead with internationally mandated reforms. "People are becoming increasingly intolerant and turning to the extreme right and left," said Cleopatra Kitti, the island's pre-eminent business adviser to government bodies. "These policies are clearly creating disillusionment with the European project even if Cypriots realise, after the drama of the last week, that their politicians have not been up to the challenge of looking after their interests. The biggest test, now, is going to be for this country's political class."
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