The Cypriot economy is moving on the edge of the abyss and politicians, financiers and bankers in Nicosia are in feverish preparation on how to get ready for the eventual return of the drachma. Minister of Finance Vassilis Sarlis has already informed President Demetris Christofias of the rescue package for the public finances of the island, offered by his ministry. The aim is to avoid the need for assistance from the European Financial Stability Facility, which would have adverse consequences for the incomes of citizens.
Cypriot media have already informed that Nicosia and other European capitals have received a document describing the eventual damage a possible GREXIT would cause to any state. Therefore, politicians and technocrats are drawing up a plan B in the case that Greece returns to the drachma. The consequences for Cyprus will be extremely serious due to the dependence of its own banking system on the Greek one and because of its significant exposure to Greek securities.
The Governor of the Central Bank of Cyprus Panicos Demetriades did not deny publicly that the country may have to resort to the facility, but stressed his desire for this to happen under the right conditions. In order for the country to manage to keep its budget deficit 2.5% of GDP, a second package of measures to save 200 million euro is necessary but no politician or economist dares to forecast whether this will happen through cutting civil servants or as in Greece - by increasing taxes.
At the same time,the president of Marfin Investment Group, Andreas Vgenopoulos, has publicly required from the consulting firm BLACKROCK to audit all Cypriot banks as it did with the Greek ones. The audit should cover their credit records in Cyprus, Greece and in all countries where they operate. Andreas Vgenopoulos suggests that the terms and conditions under which the biggest developers in Cyprus and Greece received credits should be examined as well as whether they have been paying them. MIG’s president insists on examining the conditions and reasons for the purchase of government bonds, whether the purchase was a mistake and whether anyone was held accountable for it. According to Andreas Vgenopoulos, these are serious issues and should not be left to parliamentary committees or "independent" rating agencies, but the most famous consulting company in the industry BLACKROCK should tackle them.