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Cyprus steps back from the precipice.

Date: 26/11/12

A steady stream of leaks into the Cypriot governments negotiations with the “Troika” group of international lenders last week have shed some light on just how close President of the Republic Dimitris Christofias came to doing a “Mari” on the entire Cypriot economy.

It was announced on Friday afternoon that the Cypriot government had come to an agreement with troika representatives on a deal that will amount to around 17.5 Billion Euro or 100% of island’s GDP. But behind the scenes it appears that the near shambolic posturing by Cypriot leaders almost lead to a cataclysmic run on Laiki Bank. 

As the capitalist realities that “without money you cannot pay your bills” finally dawned on the Communist leader, he issued a statement on Thursday declaring that they were “very close to an agreement”. On Friday afternoon it was announced that agreement on the memorandum had been agreed with the troika. It is plain that this “hurried” announcement was made to calm depositors with accounts at Cypriot banks.

The chief protagonists in making the President face the reality seem to be finance minister Vassos Shiarly, Central Bank Governor Panicos Demetriades and leader of the opposition DISY Nicos Anastasiades. They undertook informing the President that he could face criminal charges if he did not reach agreement with lenders, causing collapse of local economy.

Although the exact terms and amounts of the bailout are still to be decided, the Euro Group and contributing national parliaments will now ratify the memorandum and the Cypriot government will have to accept the conditions. Hopefully these terms will return economy to healthy climate and recapitalization of banks will encourage new investments.

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