Published July 06, 2012
NICOSIA, Cyprus – Cyprus won't accept conditions it deems unfair in exchange for a European bailout, the country's left-wing president said on Friday, stressing that workers shouldn't have to bear the brunt of any austerity measures.
Cyprus last week became the fifth country to ask for a bailout from its eurozone partners, just days before taking over the European Union's six-month rotating presidency.
The country expects to wrap up negotiations on the size and terms of the bailout with the so-called troika — the body made up of officials from the European Commission, the European Central Bank and the International Monetary Fund — by the end of the month. But it doesn't want to be forced to take new, harsh austerity measures in exchange for the money.
"We're now in talks with the troika and it doesn't mean that whatever the troika tells us we're going to say 'certainly'. We will hold discussions because we have our own views too," Dimitris Christofias told reporters during a joint press conference with European Commission President Jose Manuel Barroso.
Christofias said Cyprus will adopt a "balanced" approach that won't "foist the burden of the crisis exclusively on the shoulders of workers."
Christofias is keen to protect some of the most cherished privileges salaried workers have long enjoyed on the island including twice-yearly, automatic pay raises calculated according to inflation.
Christofias said his government is in talks with trade union leaders and other officials to work out a more cost-effective way of meting out those pay raises.
"Measures have to be taken that governments believe in," Christofias said, adding that he's also working to pare down a bloated public sector that swallows up a third of all government spending.
Barroso urged Cypriots to find the "widest possible consensus" on what needs to be done to streamline the economy, but warned that the coming austerity measures won't be an easy affair.
"It's the only way to sustainable growth," he said.
Finance Minister Vassos Shiarly said Friday that Cyprus' bailout terms won't be as harsh as those of other bailed-out countries, such as Greece, because its situation is different. Cyprus needs money to save its banks, which lost billions as a result of their exposure to Greece and not because of runaway debt levels.
"We are faced with a problem that has arisen mainly from the recapitalization of Cypriot banks due to their exposure to the Greek economy and Greek government bonds," Shiarly said. "Therefore, the country's public finances perhaps might not have needed a memorandum (bailout) at this time...it must be a special memorandum (bailout) which takes into account these two characteristics."
Soviet-educated Christofias, 65, again defended his government's decision to pursue a loan from close ally Russia on top of request for EU bailout money.
"Don't worry that we'll bring communism to Cyprus because of our relations with Russia," said Christofias, adding that Moscow is "rebuilding capitalism."
Russian media quoted the country's Finance Minister Anton Siluanov as saying that Moscow is considering a €5-billion ($6.2 billion) loan request from Cyprus.
Cyprus can't borrow from international markets because of its junk credit rating and is already relying on an €2.5 billion ($3.1 billion) low-interest Russian loan it secured last year.
Shiarly said it's "not unreasonable or unusual" to seek out a loan separate from EU bailout money since Ireland is also receiving loans from Britain and Sweden after putting in a EU bailout request.