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Cypriot report
by Euro Reporter
2015-04-03 10:55:14
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Cyprus intends to criminalize denial of Armenian Genocide

Cyprus lawmakers on Monday agreed to amend current legislation criminalizing the denial of genocide if the genocide in question has been recognized by the House, Cyprus Mail reports. The matter is fundamentally about the Armenian genocide, and resurfaced last week due to the upcoming visit to Cyprus of the speaker of the Armenian National Assembly to mark the 100th anniversary of the Armenian genocide. As it stands, the law states that denial of crimes against humanity and genocide is a criminal offence only where the crime in question has been recognized by irrevocable decision of an international court. Cyprus is among 22 countries that have recognized the Armenian genocide. However, because the International Criminal Court has not recognized it, thus far denial of the genocide was not a criminal offence here.

cyprus_400_01House Speaker Yiannakis Omirou was keen to add a clause to the legislation, making genocide denial a criminal offence whether it has been recognized by an international court or by a resolution of the Cyprus parliament. Following debate at the House legal affairs committee on Monday, the parties took on board Omirou’s legislative proposal, but with a modification – denial of genocide will constitute a criminal offence only where the House resolution recognizing that genocide was unanimous. Omirou had wanted the law amended before or during the visit here by Galust Sahakyan, speaker of the Armenian National Assembly. Sources from the ruling DISY party told the Mail that the House may hold an extraordinary session of the plenum on Thursday morning, before the scheduled plenary, to pass the legal amendment.

Sahakyan, due on the island on Wednesday, is on Thursday afternoon scheduled to address the House of Representatives. While on an official trip to Armenia last November, Omirou appears to have promised his Armenian counterpart that Cyprus would criminalise the denial of the Armenian genocide, as other countries – Switzerland, Slovakia, Greece – have done. Cyprus was the first European country (and the second worldwide, after Uruguay) to officially recognize the Armenian genocide. On April 24, 1975, Resolution 36 was voted unanimously by the House of Representatives. Given that decision was unanimous, the criminalization amendment now being proposed should automatically apply to the Armenian genocide. Under the law, the denial or “flagrant downgrading” of recognized war crimes, crimes against humanity and genocide, provided the crime has been recognized by an international court, is punishable by up to five years imprisonment and/or a fine of €10,000. 


As Cyprus recovers from banking crisis, deep scars remain

The financial world has pretty much moved on since Cyprus was briefly the epicentre of market anxiety. Two years ago this month, the country's banks failed en masse, A.T.M.s were rationing cash, and the integrity of the Eurozone hung in the balance. But after a contentious, internationally brokered “bail-in,’’ in which for the first time many bank depositors were forced to help pay for a Eurozone rescue, Europe’s policy makers soon found other things to focus on. Yet Christos Savvides, managing director of an advertising agency in Nicosia, the once booming capital, does not have the luxury of forgetting. Daily reminders include the rows of downtown shops that once sold luxury clothing brands but now stand empty. At one defunct auto dealership, a Renault Laguna sedan, in a thick layer of dust, is still on display behind dirty windows. Mr Savvides lost hundreds of thousands of euros that he had deposited in Cyprus banks — money seized in the rescue program to cover bank losses. Two years later, Mr Savvides’s experience, and that of tens of thousands of other Cypriots caught up in the crisis, offers lessons that could soon apply to Greece if that country is unable to reach agreement with its creditors. In retrospect, it is clear that European leaders, international creditors and bank regulators could have done more to limit the economic upheaval caused by seizing portions of depositors’ money above the level of 100,000 euros covered by deposit insurance, a threshold equivalent to roughly $105,000 at the current exchange rate.

In fact, a new European Union law written after the crisis would probably have exempted Mr Savvides, since the deposits in his case actually belonged to his clients. But that law comes too late for him and other Cypriots. One surprising lesson may be that capital controls — restrictions on withdrawals and on money transfers out of the country — were not as disruptive as feared, but did help prevent even more money from leaving Cyprus. If anything, some economists say, the restrictions should have been applied sooner, before many of the biggest and most sophisticated investors had already fled. More recently, foreign money has been trickling back into Cyprus, including a big bet by Wilbur L. Ross Jr., the American investor known for his appetite for tough cases. Cyprus also represents what many Europeans see as insensitivity in Brussels, Frankfurt and Berlin toward the people like Mr Savvides who must suffer the consequences of Eurozone crisis management. Among Cypriots, the feeling is widespread that as a country of fewer than one million people, geographically closer to the Middle East than to Europe and with a reputation as a haven for Russian cash, they were used as lab rats to test new and poorly conceived policies. “It was an experiment,” said Antonis Paschalides, a Cyprus lawyer and former government minister who is suing the European Commission and the European Central Bank on behalf of Mr Savvides and others who say their deposits were seized illegally.

“We make an example,” Mr Paschalides said, describing what he believes was the attitude of European leaders. “‘If worst comes to worst, Cyprus will collapse.’’ The parallels with Greece are not perfect. For one thing, the Greek economy, though small by Eurozone standards, is more than 10 times the size of Cyprus’s. And banking played a far bigger role in the Cypriot economy — with assets valued at six times gross domestic product before the crash — than it does in Greece. In Cyprus, Eurozone officials argue, the size of the banking system meant that depositors — many of them foreigners — had to share the burden because otherwise the country could not afford it. In Mr Savvides's case, though, the deposits seized were not even his. They belonged to clients of his agency, Ledra Advertising. When the crisis hit, Mr Savvides was in the process of using the money to buy local television time on their behalf. Mr Savvides, whose customers include the consumer products giant Unilever, had to absorb the cost. “The client says, ‘I sent you the money,’” Mr Savvides said in Nicosia last week. “'What you did with the money was your problem.’” The financial blow, along with the recession that followed the banking crisis, forced Mr Savvides to lay off several of his employees, who now number 22. Mr Savvides said his firm survived only because his clients and creditors were understanding and gave him time to make up the deficit.

Cyprus, too, has managed to survive, and by some measures is doing better than expected. But the economic situation remains dire. Unemployment, though falling from a peak of 16.6 percent in December, is still above 16 percent. The economy shrank 0.7 percent in the fourth quarter of 2014, compared with the previous quarter, the worst performance in the European Union. And more than half the outstanding bank loans in Cyprus are classified as nonperforming — a legacy of the crisis and a huge obstacle to growth.

John Hourican, chief executive of Bank of Cyprus, the country’s largest commercial bank and one of the few left standing after the 2013 crisis, conceded that the level of damaged loans was “eye-wateringly high.” Mr Hourican, an Irishman who previously ran the investment bank at Royal Bank of Scotland and was brought in by the Bank of Cyprus board in October 2013, said in an interview that he empathized with Cypriots who believe they were treated poorly by European Union institutions. Account holders at Bank of Cyprus lost almost half their money above the €100,000 level, receiving stock in the bank as compensation. Those shares have since plummeted in value. Uninsured depositors in Laiki Bank, also known as Cyprus Popular Bank, the nation’s second-largest lender, lost everything because the bank failed. “In every other country in the European Union without exception this has not been allowed to occur,” Mr Hourican said in an interview. “It has caused a psychological scar.”

European officials argue that if depositors in Cyprus had not been forced to pay, taxpayers would have had to pay instead. “Burden-sharing with private investors was not only inevitable, but it also significantly reduced the financial impact on Cypriot taxpayers and protected the vast majority of depositors,” Benoît Cœuré, a member of the Executive Board of the European Central Bank, said in a recent interview with Politis, a Cypriot newspaper. The same thing will not happen again because of new banking regulations that require lenders to build up greater financial buffers, Mr Cœuré said. The news from Nicosia is not all bad. At Bank of Cyprus, deposits rose in the fourth quarter, reversing an outflow that began before the 2013 crisis. And the last remaining restrictions on transfers of money outside of Cyprus, imposed two years ago, will be lifted next month, said Chrystalla Georghadji, the governor of the country's central bank. While those strictures impinged on the public, capital controls — which could be imposed in Greece if the flight of bank deposits grows worse — helped stabilize the banking system, Mos. Georghadji said. She is a former auditor general for the government of Cyprus and was put in charge of the central bank in April.

The capital controls “worked and they were necessary,’’ Ms Georghadji said on the side-lines of the European Central Bank monetary policy meeting held in Nicosia on March 5. Mr Hourican and others expressed optimism that after a laborious debate, the Parliament of Cyprus would finally pass legislation designed to streamline foreclosures, which can take more than a decade under current procedures. The new law would help banks put pressure on debtors who can afford to pay but who are not doing so because banks currently have little recourse against them. That would not be happy news to people in arrears on their mortgages, of course. But if banks can deal with their problem loans, they should be in better shape to lend to companies and individuals again. “You have many cases of companies that maybe could do things, but they can’t get credit,” said Stavros Zenios, a professor of finance at the University of Cyprus who is also a nonexecutive member of the board of directors of the Central Bank of Cyprus. One person who is bullish on Cyprus is Mr Ross, the American investor, who has also put money into battered Irish and Greek banks. Mr Ross, who was elected vice chairman of Bank of Cyprus in November, heads a group of investors who together own an 18 percent stake. The bet on the bank is a bet on the country, Mr Ross said. Speaking by phone from Florida, Mr Ross argued recently that the Cypriot economy had fundamental strengths, including an underexploited tourist industry and potential natural gas deposits offshore. And the Bank of Cyprus passed stress tests conducted last year by the European Central Bank, Mr Ross pointed out.

Contrary to predictions, moreover, the crisis did not destroy the local financial services industry, one of the foundations of the economy. The island is home to dozens of law and accounting firms that serve Russians and others who, despite the crisis, see Cyprus as a convenient place within the Eurozone to keep their money. “I was surprised at how little damage was done by the imposition of capital controls,” Mr Ross said. Because of the country’s network of skilled lawyers, accountants and bankers, he said, “people want to do business there.” Still, despite assurances from bankers that they have no interest in evicting people from their homes or forcing small businesses to close down, among Cypriots there is profound unease about what will happen when new legislation gives banks more power to go after debtors. Based on what they consider Europe’s ham-handed handling of the bail-in two years ago, few people expect anyone outside Cyprus to care. “We feel bitter,” said Christos Phokas, a former bank worker who took a severance package during a downsizing drive and is now is trying to establish a mediation business, helping debtors negotiate with creditors. Referring to the behaviour of the European Union in 2013, Mr Phokas said, “Instead of helping us, they acted like they didn’t know us.”


Cyprus says consortium fails to find sufficient gas quantities at 2nd drilling site

Cyprus' president sought to draw a parallel with oil-rich Norway after the latest failure in the Mediterranean island nation's quest for gas. President Nicos Anastasiades told reporters Thursday he's not disheartened by the failure of an Italian-South Korean consortium to find commercially viable amounts of gas during exploratory drilling in an area off Cyprus' southern coast. "There are similar instances in Norway where three licensing rounds were unsuccessful, but the fourth showed that it was the richest deposit," he said. His comments came after the country's energy ministry said a rig owned by the Eni-Kogas consortium didn't discover any "exploitable concentrations of hydrocarbons" during a drill to a depth of 5,485 meters (18,000 feet).

This is the consortium's second failure to find any gas following a previous drill last year. The ministry said the consortium will review procedures in order to help with its future gas search plans. And in January, France's Total said it had failed to find any potential fields off Cyprus to warrant drilling. Energy Minister Yiorgos Lakkotrypis said the gas search will continue and that the latest results "don't mean that we don't have hydrocarbons" in Cypriot waters.

"There are questions of a geological nature which must be answered," said Lakkotrypis. "As more geological data is collected, we'll get a clearer picture and the risk for future drilling will be reduced." Cyprus still banks on one proven deposit in which U.S. company Noble Energy and Israel's Delek and Avner are partners in a field that's estimated to contain more than 4 trillion cubic feet of gas. Cyprus is in talks with Egypt to supply gas, with Jordan another potential buyer. Anastasiades has maintained that offshore gas finds could act as a catalyst to reaching a deal with breakaway Turkish Cypriots on reunifying the country, ethnically divided in 1974 when Turkey invaded after a coup aiming to unity the island with Greece.


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