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Government on the defensive

20/06/2013 07:06
The government was on the defensive yesterday after the letter sent two weeks ago by President Anastasiades to the creditors for the improvement of the terms of the memorandum.

The letter, published by StockWatch last week, yesterday received extensive coverage from international media, which argue that the European officials reject substantial changes in the Memorandum.

The officials said that the letter involves a demand to renegotiate key terms of the memorandum, a few months after the agreement in March.

They blamed Anastasiades’ government for the outcome of negotiations and expressed "surprise" for the actions of the Cypriot government.

"What is being said about renegotiation of the memorandum is not true”, the President said yesterday.

Both the President and Government Spokesman Christos Stylianides tried yesterday with their interventions to emphasize the government's commitment to implementing the agreed.

They talked about misinterpretation of the letter, which may be discussed today at the Eurogroup in the presence of the Cypriot Minister of Finance.

The European officials seem to be bothered by the point on Cyprus Popular Bank.

"Another solution would be to reverse the decision of the Eurogroup in connection with the merger of good Cyprus Popular Bank (which has €9 billion ELA) with Bank of Cyprus," says the letter, putting on the table a request to change the most basic decision of the March Eurogroup”.

Cyprus has already received the first tranche of the program, based on the implementation of the Eurogroup agreement in March.

The way that the letter was handled irritated the EU, since it leaked to the media, creating the impression that it was for domestic consumption.

Despite the generally negative reactions in the letter, one of Mr. Anastasiades’ suggestions is based on the precedent of Ireland, which Cyprus will seek to repeat.

In his letter, Mr. Anastasiades suggests the conversion of ELA of Bank of Cyprus to long-term bonds and their transfer to another entity.

Something similar happened in Ireland, academia Karl Whelan wrote to Forbes yesterday.

In the case of Ireland, however, it took years of true implementation of the Memorandum to change key terms, the European officials answered. Cyprus tries to change the terms only few months after the agreement, he added.

Besides, the exception to the case of Ireland was described as unique.