“Wealth in the hands of a few” by Haris Polycarpou, Member of Economic Research Bureau of the C.C. of AKEL

 

11/15/2015 “Haravgi” newspaper

Whenever the government and the Troika want to give yet another weapon to the banks, the argument they use is always the same: Society must make more sacrifices in order to address the problems in the banking sector.

Thirty months after the signing of the Memorandum it appears they are now acknowledging that the greatest responsibility for the crisis lies with the banking system. But they refuse to understand that the recipe of austerity which they have implemented is the reason for the further aggravation of the banking sector’s problems.

The main problem facing banks today is non-performing loans (NPL’s).

In fact the banks have been turned into organizations to manage the problem of loans. However, the reasons behind the current situation are to be found in the policies being implemented so far by the Government, given that the austerity measures deprived the economy of substantial revenues and income. This reduction had a catalytic effect on the ability of households and small businesses to repay their loans.

This is the biggest contradiction in the government’s policy.

They implemented a framework of measures supposedly to address the problems in the banking sector and the result was a further deterioration of the situation.

Instead of implementing policies to boost growth and development that would improve the ability of households and businesses to pay off their debts, they adopted a policy of unilaterally conceding tools to the banks. They implemented a strict framework for foreclosures, created a new insolvency framework and recently paved the way for the sale of loans to speculative investment funds. At the same time they haven’t dealt substantively with big debtors, although the bulk of NPL’s are concentrated on a very small number of natural and legal persons.

The results are already visible. Non-performing loans continue to increase, new borrowing is almost non-existent, Cypriot banks have the highest interest rates in the Eurozone so that they are able to maintain their profits and most households and businesses are faced with the danger of the foreclosure of their properties.

So what is ultimately threatening the banking sector’s stability?

– Is it the protection of primary homes and small business premises, the protection of guarantors and the need for a fairer framework for restructuring loans and interest rates or is it perhaps the restriction of the ability of households and enterprises to be consistent with their obligations?

– How much it helped the repayment of loans or the lack of growth prospects?

– Why in the end does the government tighten the noose even further on households and businesses when the main problem is concentrated on the select few and privileged without effective measures taken by the Government and the Central Bank?

Today’s Cyprus is faced with a mass transfer of wealth from the majority of the people to the privileged few. It seems that the Government does not seem to take this into account. Besides, it knows that foreclosures or forced sales of homes and properties will create even greater pressure for a reduction in the value of immovable property. It doesn’t however admit that the result will be the concentration of property in the hands of a privileged few who will be able to buy them.

They must therefore stop advertising daily a phony “success story” in the economy. A society that is struggling to salvage its property is not something for which we should feel proud.