By Stelios Orphanides
A war of words has broken out between Finance Minister Harris Georgiades and Diko leader and presidential candidate Nicolas Papadopoulos after the latter proposed to delay debt repayments and so help social groups struck by the crisis.
Georgiades, a member of ruling Disy, the party of incumbent president Nicos Anastasiades, alleged that Papadopoulos, who is proposing to compensate bondholders and depositors for their losses suffered in the 2013 bailout, proposed a payment stoppage in order to make good on his election promises.
“What Papadopoulos promises here and there cannot be covered with the surplus of a budget but require a second and a third budget,” Georgiades said in an interview with state-radio CyBC on Thursday. “When he was asked by a journalist where all these hundreds of millions needed will be found, he said it wouldn’t be the end of the world to delay debt repayment. This can be interpreted as a payment stoppage”.
Georgiades was referring to an interview given by Papadopoulos to Cyprus’s Alpha TV on Monday.
“What we are proposing is not to take out funds form the state budget which will deprive other important programmes but to delay repaying public debt,” the Diko chairman, who is known for his populist rhetoric in economic policy issues and his hard-line in the Cyprus Problem. “It will not be the end of the world if the repayment of public debt is delayed by some years, but it will give a break to some fellow citizens who paid a heavy price for the country to exit the crisis”.
The comment prompted a caustic statement by Georgiades on Tuesday, accusing Papadopoulos for the first time of suggesting a payment stoppage.
The chairman of Diko hit back on Thursday, also talking on CyBC radio, saying his comments had been “maliciously” distorted.
“There is a degree of hypocrisy in the comments of the Anastasiades team with respect to our proposal,” Papadopoulos complained in the radio interview and added he had not proposed not to timely repay Cyprus’s debt to its official creditors who financed the 2013 bailout.
“But there is debt to third parties such as semi-governmental organisations, the Co-op, other entities,” he said adding that the Anastasiades government was allowed to extend the maturity of this debt as part of the bailout deal.
What he proposes, he continued, is a new extension of those maturities.
“What they (Disy and the government) are telling us is that only the Anastasiades government can utilise our country’s surplus to make grants to football clubs or the owners of immovable property, and inject €25m into a fund to compensate depositors and bondholders but we are not allowed to do that,” he said. “(But) if we do this, (then) it will lead to a payment stoppage. Whoever takes these facts into account realises that criticism is not in good faith”.
Georgiades, who oversaw Cyprus’s fiscal consolidation after assuming his job in April 2013, days after Cyprus agreed the terms of the onerous bailout which allowed the government to regain market access in 2015, four years after being shut out, said that “what Papadopoulos promises here and there cannot be covered with the surplus of a budget but requires a second and a third one”.
Two economists interviewed on the matter said that while negotiating an extension of a debt maturity is not equal to a payment stoppage, it may be considered a credit incident which could negatively impact Cyprus’s sovereign credit rating.
On the other hand, it could be easily evaded by issuing another security to repay maturing debt, he said.
“The whole discussion proves that politicians have not learned how to debate,” one of the interviewed economists said.