:00:16. > :00:21.days after it collapsed. Now it is Cyprus is enduring the agonies of a
:00:21. > :00:25.financial and economic meltdown. Here is DVD bad news for the
:00:25. > :00:30.Cypriot people, according to international economists, their
:00:30. > :00:35.darkest days are yet to come. The island's economy is about to shrink
:00:35. > :00:39.dramatically. Overseas investors are fleeing and the current
:00:39. > :00:43.government is struggling to come up with a survival strategy. My guess
:00:43. > :00:53.is the finance minister, Ioannis Kasoulides. Who and what will suit
:00:53. > :01:12.
:01:12. > :01:19.side was? Ioannis Kasoulides, will come to
:01:19. > :01:24.HARDtalk. Good evening.No one would dispute that Cyprus is in a
:01:24. > :01:31.terrible mess. Do you acknowledge that you in Cyprus have no one to
:01:32. > :01:36.blame but yourself? We have greatly to blame ourselves. It is true that
:01:36. > :01:40.Cyprus has not taken the right decisions at the right times as
:01:40. > :01:46.early as possible. That is as far as fiscal consolidation is
:01:46. > :01:50.concerned. Neither has Cyprus taken the right decisions regarding the
:01:50. > :01:58.expansion of the banking sector becoming bigger and bigger and
:01:58. > :02:02.bigger. When the problem of the PSI came up, the first problem, by
:02:02. > :02:08.being bigger than the GDP of the country, the country could not help
:02:08. > :02:11.the banks. That was a fundamental strategic error? It is acknowledged
:02:11. > :02:16.as a strategic error and an error of not taking the right decisions
:02:16. > :02:22.because they were unpopular decisions. When the German Finance
:02:22. > :02:28.Minister talks about your economic model being broken, being bankrupt
:02:28. > :02:38.as a model, as an entire strategy, you would accept that? Yes, I think
:02:38. > :02:46.I would accept this. We must now look for a more healthy model, an
:02:46. > :02:51.economic model that is diversified. To add to what you have been asking
:02:51. > :02:54.me, having accepted our responsibilities, I must express
:02:54. > :03:03.the bitterness and the disappointment of the Cypriots of
:03:03. > :03:12.the fact that the choice of the remedy was so abrupt and so brittle
:03:12. > :03:21.that everything had to be connected to the banks. It had to be abrupt
:03:22. > :03:27.going bust and threatening to take the entire economy with them.
:03:27. > :03:33.initial decision, say we were given a three-year adjustment period to
:03:33. > :03:40.bring down the size of the banks to the right size, to reform the
:03:40. > :03:44.banking model, I think we would have avoided the serious problems
:03:44. > :03:49.that, as you have said in your introduction, the Cypriots are
:03:49. > :03:56.going to face. Enterprises are closing down. People are losing
:03:56. > :04:00.their jobs. There are consequences. I advisedly began with his idea of
:04:00. > :04:03.acceptance of responsibilities because I have heard you, you
:04:03. > :04:09.president and other senior figures in the government saying things
:04:09. > :04:13.like "It is not fair. Europe is treating us like a guinea pig in a
:04:13. > :04:21.grand experiment. Europe is pretending to help but the price
:04:21. > :04:24.they are asking is too high." All of the statements appeared to be
:04:24. > :04:29.directed at pointing a finger at Europe than fixing your own
:04:29. > :04:35.problems. There are two things. We have to fix our problems. This
:04:35. > :04:45.should not stop us from expressing within the European Union as true
:04:45. > :04:48.
:04:48. > :04:55.Europeans are criticism what has happened. Who could deny that what
:04:55. > :05:03.has happened regarding the Beale in. For people to do not understand,
:05:03. > :05:08.the Beale in his the people are part of the package. They are
:05:08. > :05:14.taking a haircut of their own, to use a dreadful word. This is the
:05:14. > :05:23.answer to the bigger question about the bank's in Europe that are too
:05:23. > :05:30.big to fail. Money is always available to banks whose management
:05:30. > :05:40.is reckless and take risks. An experiment was needed. This is the
:05:40. > :05:47.Guinea Pig we are talking about. The experiment was using Cyprus. It
:05:47. > :05:51.was used and now it has served as an example for the rest. I spoke to
:05:51. > :05:55.Christine Lagarde, the managing director of the IMF the other day.
:05:55. > :05:59.The first point she made was that Cyprus is not, absolutely not, a
:05:59. > :06:03.template for what will happen in other European Union weaker
:06:03. > :06:08.economies. She does not see it as a model. She also said one thing
:06:09. > :06:13.which was interesting to me, she said that in terms of regret, the
:06:13. > :06:19.regret she had about the whole bale out, Beale in process was that the
:06:19. > :06:23.Cypriot government and the feelings of the Cypriot people were not on
:06:23. > :06:28.the same page. She regretted that she had not understood that. We
:06:28. > :06:31.your government, you put up an, demanded that the deal in the
:06:31. > :06:37.involved even the small bank deposits, those was less than when
:06:37. > :06:40.on the 1,000 euros and the Bank were involved, the IMF and the EC
:06:40. > :06:45.eventually signed on to it. They believe that was a fundamental
:06:45. > :06:50.mistake that begun with you President. I don't think that this
:06:50. > :06:59.is true. That is what they say afterwards. The truth is that there
:06:59. > :07:04.was a proposal which in all -- which involved bank deposits of
:07:04. > :07:10.below 100,000 of a small amount, I think 3.5, which would have
:07:10. > :07:15.appeared as a levy, a temporary Leddy to be transformed into shares.
:07:15. > :07:22.This was your Government's idea? The shares was our Government's
:07:22. > :07:29.idea. The proposal for 3.5 % below 100,000 was there because it was
:07:29. > :07:39.yielding according to the proponents of the idea 2.5 billion
:07:39. > :07:43.out of the five. Tape that was needed. With the spread, everybody
:07:43. > :07:46.-- 5.8 that was needed. With respect, everyone said that you
:07:46. > :07:51.president wanted the small depositors to take if you cut
:07:51. > :07:55.because it was the only way he felt he could sell the -- the proposal
:07:55. > :07:59.to the big depositors, many of them Russians, cook are going to take a
:07:59. > :08:03.much bigger hair cut. You have spoke to everyone else. Now you're
:08:03. > :08:09.talking to me. You are getting my version. Somebody around here is
:08:09. > :08:16.not telling the truth. I do not know this is. Could you think it
:08:16. > :08:20.is? And seeing what final. I know that a proposal came. They said
:08:20. > :08:26.they looked at the figures and they said that many accounts were
:08:26. > :08:34.divided so that they could go below 100,000. There was the argument
:08:34. > :08:39.that below 100,000 was yielding 2.2 billion, a substantial amount.
:08:39. > :08:43.want to talk about the future, not just to pass. Would you now accept
:08:43. > :08:53.that that initial idea to make small depositors pay was a terrible
:08:53. > :09:00.mistake. That? Yes or no? It was a mistake. If you do this, you have
:09:00. > :09:04.to compensate those below 100,000. The state was not in a position to
:09:04. > :09:08.do so. Next question, would you accept that the Cypriot government
:09:08. > :09:12.still has not been entirely straight with its own people? I
:09:13. > :09:16.remember sports people for your government in the immediate
:09:16. > :09:20.aftermath of the deal assuring the Cypriot government that capital
:09:20. > :09:24.controls would be temporary and are billeted within weeks. You we are,
:09:24. > :09:30.many weeks after the initial deal was done, capital control is still
:09:30. > :09:33.in place and there is no indication as to when it will be lifted.
:09:33. > :09:39.know this decision, could asides about capital controls and
:09:39. > :09:47.restrictions. -- who decides. The decisions are not made by sappers.
:09:48. > :09:51.They are made by the Governor of the central bank. -- Cyprus. He is
:09:51. > :09:55.in constant communication with the European Central Bank. I still
:09:55. > :10:05.maintain that the restrictions which are gradually lifted are
:10:05. > :10:10.going to be lifted altogether in the not-too-distant future. What
:10:10. > :10:13.remains to be arranged before lifting them all together is to
:10:14. > :10:17.decide about the exact amount of the haircut for the Bank of Cyprus,
:10:18. > :10:23.which has not yet been decided. is going to be very substantial,
:10:23. > :10:27.isn't it? The big depositors in the other bank have lost their money.
:10:27. > :10:37.The Japanese. It may be that they will be finished in the back of
:10:37. > :10:37.
:10:38. > :10:43.Cyprus, too. -- they are finished. There is a plan to save the Bank of
:10:43. > :10:47.Cyprus. If you possibly can?Norma. The undertaking of the European
:10:47. > :10:55.Central Bank is to do everything that is available in order to save
:10:55. > :11:00.the Bank of Cyprus. I think the way that we are proceeding, the prudent
:11:00. > :11:06.way, we're going to save this bank. Let's talk about some of the other
:11:06. > :11:09.ramifications of this catastrophe for Cyprus. Again, is the
:11:10. > :11:14.Government been entirely straight to the people of the country? The
:11:15. > :11:18.initial Britain was Cyprus was put at around 7 billion which was going
:11:18. > :11:24.to come from the dealing in of the bank deposits. That rose within
:11:24. > :11:29.weeks, according to both the IMF and the you to another 6 billion on
:11:29. > :11:34.top. -- the EU. This is money the Cypriots himself are going to have
:11:34. > :11:39.to find. Did you know that extra 6 billion was going to be imposed on
:11:39. > :11:46.you people? This money that you are referring to, if I understand
:11:46. > :11:56.correctly, that is what Cyprus is going to be, its contribution...
:11:56. > :11:57.
:11:57. > :12:01.is now would be 13 billion. This is not the case. It was decided that
:12:01. > :12:08.they would be cuts in public expenditure, an increase in
:12:08. > :12:12.taxation. All of these members -- measures had been agreed upon. This
:12:12. > :12:17.is the 6 million that you are referring to. That sounds simple
:12:17. > :12:22.but it is not. I am checking the Cypriot news wires. In the last
:12:22. > :12:27.couple of days, there was a bill for additional skilled pay cuts in
:12:27. > :12:30.the public sector. They have delayed an item looking at further
:12:30. > :12:37.restrictions on public health care entitlement. Some of the very
:12:38. > :12:41.profound and very difficult cuts and savings Thatcher government
:12:41. > :12:44.that savings are due government would win to make have been
:12:44. > :12:52.postponed. Parliament should have the right to examine thoroughly
:12:52. > :13:01.what the Government is proposing. We respect this. Everything will be
:13:01. > :13:09.in place as it was in December when Parliament, in an exemplary,
:13:09. > :13:12.accepted all the conditions that were discussed. This is going to be
:13:12. > :13:22.the case, hopefully, the stove. I think you should wait for this
:13:22. > :13:23.
:13:24. > :13:30.decision. -- this time. In a weaker to, I don't think that this is
:13:30. > :13:35.something that will happen. I sense your confidence and I am sure you
:13:35. > :13:45.are aware of the depth of desperation, of Lange, of fury that
:13:45. > :13:46.
:13:46. > :13:50.many ordinary Cypriot people feel. Rightly so. I do not think you have
:13:50. > :13:58.said to you viewers that this parliament came to power on the 1st
:13:58. > :14:04.March. This Government, off while in opposition, was the one that was
:14:04. > :14:10.criticising all along the handling of the economy, the handling of the
:14:10. > :14:20.banking sector and had to deal with this abrupt Beale in within 15 days
:14:20. > :14:26.
:14:26. > :14:31.of taking power. I don't think you Will it actually helped to pile
:14:31. > :14:36.blame on the last government? I have been looking at opinion polls
:14:36. > :14:42.show that 95% of Cypriots think the entire political elite is corrupt,
:14:42. > :14:49.is incapable of dealing honestly with Cyprus's current problems.
:14:49. > :14:59.will not blame the feeling of the public opinion in Cyprus after what
:14:59. > :15:08.
:15:08. > :15:15.is happening before. It has come to a point with the destruction of the
:15:15. > :15:20.economic model. Instead of blaming each other, we need to get together
:15:20. > :15:27.and regain the confidence of the people. Otherwise we need to go
:15:27. > :15:31.home and have new people at the helm. It doesn't augur well that
:15:31. > :15:35.the President said up an investigation panel to try and
:15:35. > :15:42.figure out what happened, and two of the three judges have already
:15:42. > :15:45.quit. The last one who quit has discovered that the law firm of his
:15:45. > :15:54.sons were involved in some lawsuit against the Bank of Cyprus and
:15:54. > :15:57.conceded that he should exempt himself. It is for reasons --
:15:57. > :16:05.reasons of self-righteous that they have quit and not for any other
:16:05. > :16:12.reasons. Let's just think about how Cyprus does get back to some sort
:16:12. > :16:19.of sustainable growth. We spoke in preparation for this to one of the
:16:19. > :16:23.world's most important and influential investors. He says, the
:16:23. > :16:28.rescue of Cyprus does little to enhance the outlook for the country.
:16:28. > :16:32.Without growth, sustainability is a major issue. And he asked one major
:16:32. > :16:37.question - where is the job engine for a country that is now devoid of
:16:37. > :16:45.any meaningful growth model? What is your answer to that? It is a
:16:45. > :16:53.very difficult answer, but we have introduced a number of measures
:16:53. > :16:57.that will stimulate the economy. Not measures coming from the
:16:57. > :17:02.Government, but measures for stimulating the private sector.
:17:02. > :17:12.That is where we put our hope because the private sector is not
:17:12. > :17:12.
:17:12. > :17:17.the first time that has managed to succeed. We had a similar thing in
:17:18. > :17:27.1974 during the Turkish invasion. The resilient was demonstrated the
:17:27. > :17:35.them. Grit took over again. -- growth. But with measures and
:17:35. > :17:40.incentives that will allow the private sector to get its activity
:17:40. > :17:46.going - for instance, an effort is made by the banks to cut interest
:17:46. > :17:50.rates. One of the major problems in the economy of Cyprus was the fact
:17:50. > :17:55.that the high interest rate on deposits made people park their
:17:55. > :17:59.money in banks instead of investing them or spending them in the
:17:59. > :18:08.economy. Now the interest rates are going to come down and hopefully
:18:08. > :18:12.that is one of the major stimulate us of the economy. Unit -- you do
:18:12. > :18:15.not need to pour money from the government to stimulate an economy.
:18:15. > :18:20.I'm very aware that they had the Cypriot Foreign Minister in front
:18:20. > :18:23.of me. When we meant -- in which many outside observers had said
:18:23. > :18:33.that Cyprus could reasonably and quickly changed the economic
:18:33. > :18:34.
:18:34. > :18:39.outlook for your country is to us get serious about the normalisation
:18:39. > :18:43.with the north of your island. By talking directly to Turkey. They
:18:43. > :18:49.have offered you immediate summit talks. Why do not say yes? First of
:18:49. > :18:57.all, they have not offered that. They want the usual talks between
:18:57. > :19:02.the two communities. It has asked that say we should stop pretending
:19:02. > :19:06.and the main problem is between Turkey and Cyprus. The way that the
:19:07. > :19:10.problem is going to be resolved is by talking directly to Turkey.
:19:10. > :19:18.Secondly, do you think that it is right for Turkey at this moment to
:19:18. > :19:25.be perceived that it is feeling a weakness and take advantage of this
:19:25. > :19:32.weakness for its own benefit? is the language of dignity. It is
:19:32. > :19:37.the old thinking. What we have seen his your country, in 2004,
:19:37. > :19:44.rejecting a UN peace plan brokered by Kofi Annan. The Turkish side
:19:44. > :19:48.accepted it. Over the most recent negotiating period, you have seemed
:19:49. > :19:54.disinterested in achieving peace. Surely now, given the fundamental
:19:54. > :19:58.country faces, it is time to change the language, changed the thinking
:19:58. > :20:05.and really engage. The last thing the Cypriots would like to hear at
:20:05. > :20:11.the moment is that all these economic problems that have taken
:20:11. > :20:15.place was prepared in order to bring them a -- bring them or force
:20:15. > :20:21.them into accepting a settlement that they do not like. You mention
:20:21. > :20:27.the referendum... To a name like it more now. The ballot boxes bring
:20:27. > :20:34.results debt one has to respect. Whether it is a yes or Rainow.
:20:34. > :20:38.supple, let's talk about the tax. - - for example. It is wrong to
:20:38. > :20:44.accuse people when they have taken the decision in a democratically
:20:44. > :20:51.because they had the choice. They had the choice to say yes or no. I
:20:51. > :20:56.have said yes. I am obliged to respect the decision of the people,
:20:56. > :20:59.like any other democratic person. Circumstances have changed. If we
:20:59. > :21:04.look at one other way Cypriots had hoped they might escape the
:21:04. > :21:08.terrible crisis they face, they look at the potential of the gash
:21:08. > :21:13.was -- gas reserves. There is no way they can be exploited
:21:13. > :21:21.peacefully and successfully without a long-term peaceful stable
:21:21. > :21:27.relationship with Turkey. I am surprised that in this action is so
:21:27. > :21:32.easily acceptable. Dead turkey can dictate to another independent,
:21:32. > :21:37.sovereign country, is acting legitimately according to the
:21:37. > :21:42.United Nations Convention for the law of the seat, that Turkey has
:21:42. > :21:48.the right to dictate what is going to happen about the wealth that
:21:49. > :21:53.exists in the economic zone of Cyprus. Does it make any difference
:21:54. > :21:59.to you that the EU, the commission, leading European politicians, all
:21:59. > :22:04.want to see your government engage in a new way on the Cyprus problem.
:22:04. > :22:07.Who said that we are not going to engage? Nothing I am hearing from
:22:07. > :22:12.you suggests that there is any new thinking. You have not seen
:22:12. > :22:16.anything yet. Let me tell you something - it is so unreasonable
:22:16. > :22:22.that we say let us wait until October because now we cannot focus
:22:22. > :22:29.on the efforts for the solution of the Cyprus problem as our primary
:22:29. > :22:34.duty to our citizens. We need to put the economy in a way to recover.
:22:34. > :22:39.Is it too much what we are asking? Why use Turkey insisting that we
:22:39. > :22:47.should begin immediately? What is the reason behind this insistence?
:22:47. > :22:52.It shows no sensitivity. It is not an enmity language, as you say.
:22:52. > :22:57.am interested in the degree to which you put a great faith and
:22:57. > :23:03.great store by the democratic voice of year and people. All of the
:23:03. > :23:10.polls suggest that your compatriots are fed up with the road. In some
:23:10. > :23:17.polls the majority want to get out time to lead. -- lead. A leading
:23:17. > :23:23.economists says leaving the euro would greatly speed up Cyprus's
:23:24. > :23:28.recovery process. Few believe that? No, I am against leaving the euro.
:23:28. > :23:33.First of all because there is no alternative. The reason alternative,
:23:33. > :23:37.obviously. You can restore the pound, you can devalue, you can
:23:37. > :23:40.help your own tourism and real estate industry. You could persuade
:23:41. > :23:47.your people and outside investors that there is a brighter future
:23:47. > :23:53.with the Cypriot pound. I do not share this view. I considered that
:23:53. > :23:57.by leaving the euro at the moment, our currency would be devalued. It
:23:57. > :24:04.will give it -- the value to such an extent that a country that
:24:04. > :24:08.depends entirely on imports of raw material petrol -- raw material,
:24:08. > :24:13.petrol, medicines and infrastructure materials, then who