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Friday, May 3, 2013
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Shiarly: haircut was not on table It was raised at an informal meeting but then withdrawn by the troika, former minister tells inquiry By Elias Hazou
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EITHER the banks nor the government were aware of the extent to which the Greek haircut would damage Cyprus and “could not and did not take any measures” through negotiations to limit the consequences, former Finance Minister Vassos Shiarly said yesterday. Shiarly was testifying before the committee of inquiry that is probing the circumstances leading up to the ‘bail-in’ of Cyprus’ two largest banks where he also spoke of the previous administration’s track record of deficit spending; saying that while expenditure grew by approximately €1bn a year, revenues were consistently dropping. During the course of 2012, Shiarly said, he had alerted former President Demetris Christofias to this; the latter assured him his government would take measures to bring the deficit down to below 3 per cent of GDP, as per the European Commission’s demands. When it came to the haircut on bank deposits, Shiarly also said it was never put on the table while he was in office. “What was discussed was a haircut on the banks’ securities, an issue on which we raised objections,” he said. Only once did the troika broach the subject of a hair-
cut, he said, in December 2012, but this happened during the course of an ‘informal’ meeting. Subsequently, the troika team itself withdrew the idea, deeming it potentially disastrous for the Cypriot economy, said Shiarly. But documents in the public domain appear to repudiate Shiarly. The first memorandum concluded with the troika (November 2012) contains an oblique yet unmistakeable reference to a ‘bail-in’ of depositors. Paragraph 1.19 of the MoU states: “The authorities will introduce legislation establishing a comprehensive framework for the recovery and resolution of credit institutions, drawing inter alia on the relevant proposal of the European Commission.” The EC proposal (dated June 6, 2012) cited clearly refers to ‘bail-in’ as a method of recapitalising stricken lenders, and was the formula used in March in dealing with the two largest Cypriot banks. Moreover, the same paragraph goes on to say: “The framework will be subject to consultation with the EC, the ECB and the IMF and will enter into force by [endJanuary 2013]. The Central Bank of Cyprus will become the single resolution authority for banks and cooperative credit institutions. “The new resolution legal
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Agriculture Minister, Nicos Kouyialis (left) is shown a leg of lamb by a butcher in a Nicosia supermarket yesterday as the minister ‘does his Easter rounds’. Kouyialis said prices this year were 25 per cent lower than last year, and he urged consumers to buy more local produce (Christos Theodorides) SEE STORY PAGE 3
British children already in the habit of saving up By Vicky Shaw BRITISH children as young as 10 are already saving up for ‘key milestones’ in their lives such as university, buying their first home or starting a business, a report found yesterday. The tough economy has produced a generation of financially savvy children, many of whom are more ‘switched on’ to savings than their parents were at the same age, investment provider Scottish Widows found. With the prospect of university tuition fees and a typical 20% deposit cur-
rently put down by first-time house buyers, 11% of children said that they have already begun saving towards the cost of college, university, or buying a home. A further 6% said they are saving up for a car - while 2% of entrepreneurial children said they are putting money aside to start their own business. However, toys, games and gadgets remain children’s savings priorities, with 48% of youngsters saving up for this purpose. Some 98% of 10-year-olds said they have already got into the habit of putting some of their cash away for
a rainy day, while just 15% of adults surveyed said they had started saving before the age of 15. The majority of children who regularly receive pocket money said they get between £5 and £9 a week. Most children said that they save a portion of this cash, although 10% put all of it away. The report suggested that the economic downturn has had an impact on children’s savings habits. Publicity around the Government’s landmark efforts to automatically enrol people into workplace pensions and encourage people into a lifelong savings habit may also be having an effect.