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Populism an illness

By Lefteris Adilinis and George Telaveris

Former President and successful businessman George Vassiliou regards populism as the “biggest illness of all” in Cyprus, while he urges the government to go beyond the bailout programme with measures to attract foreign investment.

In an interview with the Cyprus Weekly, Vassiliou, 83, shared his thoughts on critical issues facing the country, the role that the government is playing and explains how Cyprus should move forward.

MPs are threatening the economy

The former president is worried about the impact of populism on the economy and society.

He says politicians fell into the populist trap when they turned down the first decision by the Eurogroup of finance ministers for a more modest haircut on all depositors in March 2013. In the end, a much higher haircut on deposits over €100,000 was pushed through but this also led to the closure of Laiki.

He noted that MPs did the same with the legislation on co-operatives, which MPs rejected but then passed again at 30 minutes past midnight when they realised it would have led to the immediate closure of the co-operatives.

A similar episode occurred with legislation on privatisations.
“They took these decisions not because they care about Cyprus … and forgot that by doing that they destroy the people.”
Vassiliou says that the MPs “have not learned” from their earlier mistakes. He is now worried about members of parliament (MPs) suspending the legislation on foreclosures. “Our MPs are threatening the economy with their populism,” he said.

“They try to persuade people that they care but in reality they make it difficult for them. In practice they protect people that have nothing to do with primary residences,” he said.

“By the time they decide to enforce it we might have lost our credibility.”

Go beyond the bailout

Cyprus enjoyed significant economic growth under the Vassiliou presidency (1988-93) but the former president does not see economic revival in 2015 under the current regional and international situation.

“I am very worried and it’s not only up to the government to achieve growth of the economy,” Vassiliou said. He explained that current situation in Greece is affecting Cyprus and especially businessmen active in both countries.

Vassiliou is also sceptical about the economic conditions of the European economy, underlining that even though the EU is expected to see modest growth this year it has its own troubles that could affect Cyprus.

“All these together make me very worried. I will be very happy if we succeed to be at the same level as 2014.”

Real GDP in Cyprus declined by an estimated 2.4% in 2014. With this in mind, Vassiliou encourages the government to take more initiatives to attract foreign investment in Cyprus. He says that, by itself, implementing the bailout programme will not be enough.
“We took measures but we should take more. In my opinion we should reduce taxation,” he says.

“Judging from my experience, cutting taxes increase incomes. We have to convey the message that our system is just and can be even better.” Referring to the large increase in tax on deposit interest, he said, “You cannot persuade people to bring their deposits in Cyprus with 30% tax”.

Economic take-off with Cyprus solution

However, the former president says that the real key to economic recovery is solving the long-standing Cyprus problem.

“You might regard me as an idealist but my position is very clear. If we want Cyprus to take off, we have to solve the Cyprus problem.”
He acknowledges that Turkey is currently behaving in an arrogant and aggressive way against Cyprus. But he insists that President Nicos Anastasiades should find a way to restart negotiations. Vassiliou says that “for progress to be made negotiations need to move really quickly”.

Discovery of natural gas in the offshore Aphrodite field in the exclusive economic zone (EEZ) could make all the difference, he says, and could change the Turkish preference for the current status quo after 41 years of occupation of the northern part of the island, Vassiliou says.

“I have always been against the concept of liquefaction of natural gas. I believe that the only way for Cyprus to be an energy hub is to export its own gas, and the gas from Israel and Lebanon, to Turkey, and from there to Trans Adriatic Pipeline (TAP). There will be so many benefits for Turkey that will provide incentive for the first time for a solution.”

The TAP will link natural gas from Azerbaijan from the border of Greece and Turkey to Italy.

President Vassiliou described as “a joke” the idea that Cyprus could export its natural gas through a pipeline to Crete with current prices. He also pointed out that if we cannot trust Turkey with our gas, then there is no point in continuing to negotiate for a solution on Cyprus problem.

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