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Cyprus to swear in new finance minister

03 April 2013, 11:33

Nicosia - Cyprus's new finance minister was due to be sworn in on Wednesday following his predecessor's resignation hours after a probe was launched into how the island was pushed to the verge of bankruptcy.

Haris Georgiades, a 40-year-old economist who had been serving as labour minister, will formally take up his new post a day after Michalis Sarris said he was stepping down to co-operate with judges investigating the failure of Laiki Bank, where he was chairperson for much of last year.

The bank's collapse was a major contributor to the island's near financial meltdown and need for a crippling eurozone bailout.

President Nicos Anastasiades said on Tuesday he had accepted Sarris's resignation with "sadness" and lauded his "high political ethos" for stepping down.

Sarris said he believed stepping down was "the right thing" to do to facilitate the investigators' work.

His departure came as the government wrapped up talks with international lenders that will open the way for Cyprus to receive a €10bn bailout, said government spokesperson Christos Stylianides.

Bank restrictions eased

"Today we have completed the forming of the memorandum, which is a precondition for the loan agreement," with the period to implement the deal extended by two years to 2018 to "ease pressure on the economy", he said.

It "should have taken place a lot sooner, under more favourable political and financial circumstances", he said, but added: "Even with this delay, the situation is now normalising, stabilising and the conditions to restart the economy are created."

Cyprus is already in recession, and as he resigned Sarris said that "2013 will be a very difficult year, and the beginning of 2014 will also be difficult. Beyond this I believe the prospects are positive".

The central bank eased restrictions imposed last week to prevent a bank run, raising the limit on business transactions from €5 000 to €25 000 and allowing people to write cheques of up to €9 000.

With public anger mounting, Anastasiades said no one would be immune from the new judicial inquiry into the banking collapse, and called on the commission - headed by former Supreme Court judge George Pikkis - to investigate him and his relatives with "extra vigour".

This is seen as a move to counter so far unsubstantiated allegations that family members used privileged information to get money out of the country before deposits were locked down.

Stringent capital controls

Other leading politicians and business figures have also been accused of taking advantage of their positions to protect their assets from a hit on bank deposits imposed by EU-led creditors last week.

Under the bailout deal with the European Union, European Central Bank and International Monetary Fund, those with savings larger than €100 000 in the Bank of Cyprus face losing up to 60% of their deposits over that amount.

Those in second lender Laiki will have to wait years to see any of their money over €100 000 as the bank is shuttered.

Central bank official Yiangos Demetriou told state radio on Tuesday that Bank of Cyprus savers would now be able to access 10% of their deposits over €100 000.

But he added the "troika" of bailout creditors had asked for more information before agreeing to release the full 40% of deposits over that threshold that savers can be sure of retaining.

Banks have been operating under stringent capital controls since they re-opened on Thursday, after a near two-week lockdown prompted by fears of a run on deposits.

Central Bank of Cyprus governor Panicos Demetriades said the remaining controls would be eased in stages.

"I can't really tell you if it will be seven or 14 days before capital controls end," he told the Financial Times. "We have to lift them gradually."



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