Cyprus plans to use part of future revenue from gas reserves to pay down public debt and should strengthen ties with Russia so it participates in a bailout for the island nation, said presidential candidate Stavros Malas.
Some income from natural gas should be used “for development of the country and, more importantly, we should use some as a deposit for future generations, as the Norwegians are doing,” Malas, a former health minister who is backed by the Communist party, said in an interview at his office in Nicosia yesterday. Offshore gas deposits have been found in Cyprus and the government has issued licenses for hydrocarbon exploration.
Cyprus has been in negotiations with the European Commission, the European Central Bank and the International Monetary Fund over the size and terms of a bailout since June, when it became the fifth euro-area country to request aid. Completing an agreement on the rescue will fall to the winner of the Feb. 17 presidential election.
Malas, 45, who would come second in the vote according to the last three polls released before the vote, said he would reinforce financial ties with Russia, which counts Cyprus as its biggest source of foreign direct investment and granted it a 2.5 billion-euro ($3.3 billion) loan in 2011. Cypriot Finance Minister Vassos Shiarly said earlier this week that he expects an extension requested on the loan to be granted “very soon.”
“I will strongly, strongly encourage Russia to get involved in financing Cyprus because it sends out a political statement at the same time as helping the country,” Malas said.
Germany insists that Russia contribute to any international bailout because Russian capital, legal or illegal, dominates the Cypriot banking system. Some European Union states, including Germany, have accused Cyprus of money laundering and euro-area finance ministers said on Feb. 11 that Cyprus needs an independent money-laundering audit.
Malas said he would be open to a probe into Cyprus’s implementation of money-laundering laws, provided it’s approved by Cypriot authorities. Still, “you have to really wonder why open this discussion for Cyprus now,” he said. “These types of allegations have been fired against a number of countries, including those that are today firing these allegations at Cyprus.”
Cypriot lenders including Bank of Cyprus Plc and Cyprus Popular Bank Pcl lost more than 4 billion euros last year in Greece’s sovereign-debt writedown, the biggest such restructuring in history. Pacific Investment Management Co. was hired to review the portfolios of Cypriot banks to assess their recapitalization needs, which will determine the size of the nation’s bailout.
“A political decision, which was taken in Europe in 2011 to bail out Greece and help the euro zone, had a disproportionately negative impact on our banking sector,” Malas said. “That needs to be counteracted by political decisions taken at the European level to help out Cyprus.”
No losses will be imposed on depositors, who aren’t responsible for the political decisions made by Europe to reduce Greece’s debt burden, Malas said. Cyprus’s banking industry will shrink because “it can no longer maintain overseas operations,” he said.
As a small nation with a “versatile” economy, Cyprus can overcome its crisis quickly and attract foreign direct investment once uncertainty has been lifted, Malas said. Any talk of Cyprus exiting the euro is a “no-go area,” he added.
Malas was trailing DISY party leader Nicos Anastasiades in the last opinion polls released on Feb. 10.