Cypriot Leader Vows to Defy Troika, Seeks Bailout Backing

Cypriot President Demetris Christofias promised to defy a demand from international lenders to rein in wages as he pushed political leaders to rally behind him before a new round of bailout talks.

Christofias, a communist, said last weekend that he’d defend wage indexation and the so-called 13th salary, which the troika that oversees euro-area bailouts has said must be scrapped. “I’m certainly ready to take to the streets with the workers,” he said.

The president, who won’t run in a February election, met today with political-party chiefs to discuss his government’s counter-proposal to the troika, which consists of officials from the European Commission, European Central Bank and International Monetary Fund. Christofias needs opposition support to push any budgetary measures through parliament. Talks will resume at the technical level this afternoon.

Cyprus in late June became the fifth euro-area nation to request a financial rescue since a 2010 bailout of Greece. The government is in talks with the troika to fix the size of the bailout, which will encompass banks weakened by their exposure to the Greek economy as well as the public sector.

Overdue Loans

In its draft counter-proposal, which was discussed with union and business leaders in the last few days, the government rejects the troika’s call to sell some state assets as a condition for aid and seeks to shield its banks from new requirements, such as an 18-month limit after which creditors could sell collateral backing overdue loans.

Nicos Anastasiades, head of the main DISY opposition party, said he had proposed amendments to the government’s draft aimed at shielding workers from the brunt of any austerity program.

“The timetable doesn’t allow for procrastination,” he said after the first round of today’s talks. “If we don’t submit a plan to the troika, I don’t see them coming back. If that happens, we may face worse consequences than those we’re trying to avoid.”

Government spokesman Stefanos Stefanou said common ground was found in the morning session on issues such as banks and the budget. Experts will try to work out the details in the afternoon round, he said.

Anastasiades, who leads the race to succeed Christofias, said disagreement remained on the extent of wage cuts for workers and tax increases. His party has called for gambling to be legalized, which would bring in 370 million euros of revenue over four years, he said.

Russian Loan

“Without the consent of the political parties it will be very difficult to move ahead,” Christofias said in the coastal village of Pissouri. Since the budget requires the approval of parliament, the government can’t advance without broad support. “And if we don’t move ahead, we’ll be shooting ourselves in the foot,” he said.

The government has also sought a 5 billion-euro ($6.5 billion) loan from Russia, though Russian Finance Minister Anton Siluanov said Oct. 12 that no agreement has been reached.

Cyprus is in talks to extend the maturity of a 2.5 billion- euro loan granted by Russia last year, Cypriot lawmaker Stavros Evagorou said. Russia has given “positive signals” on prolonging the loan’s maturity by four years to 2020, he said.

To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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