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Victoria Mindova

"A decision must be made on which model Cyprus will follow, there is no time to lose. The Greeks have to be a little more consistent in what they want from the lenders too," a source close to Brussels told GRReporter in connection with the failure of the talks to rescue Cyprus. Until recently, the Greeks have presented as successful the model of Iceland under which the people refused to take the losses of banks and depositors paid the risk they had borne with their deposits in banks offering higher premiums as stated by the source. "When a similar model was proposed to Cyprus, everyone opposed it. Another option that remains is the model of Ireland under which all taxpayers took on the burden of saving three large financial institutions at the expense of very strict fiscal consolidation."

The head of the task force to restore the economic growth in Greece, Horst Reichenbach, also supports the idea that the decision on Cyprus cannot be delayed. "The fastest possible solution, that satisfies the Cypriot people and responds to the issues facing the European Union today, must be found," the European technocrat told journalists.

According to Skai TV, the bailout to Cyprus includes 5.8 billion-euro in aid to its banking sector, which suffered from the haircut of the Greek government bonds last year. Due to the reduction of the face value of Greek government bonds, approximately 4 billion euro of the balances of Cypriot banks were written off. In addition, the hole in the state budget of Cyprus for the next three years is approximately 1.5 billion euro and the requirements to repay the external debt by 2015 amount to approximately 6 billion euro. The European Union is ready to provide assistance to cover the budgetary needs of the country, but Cyprus alone has to raise funds to save its banking sector.

GRReporter turned to the president of the Athens Chamber of Commerce and Industry Konstantinos Mihalos to comment on the development of the problem of the Cypriot economy. "Greek business is following with concern not only the developments in Cyprus but also the behaviour of the entire euro zone," says the entrepreneur. Mihalos believes that the euro zone is at a critical point and that Germany must finally change the course and introduce a new approach in the attempts to rescue the continent.

"We need a policy that will produce economic growth, not recession. We are seeking an effect that will change the situation not only in the countries of the European periphery, but in the entire euro zone." Mihalos expresses his belief that an agreement with the lenders will be reached soon that will prevent the outbreak of a new crisis, which could have more serious consequences this time than before.

As regards Cyprus, the president of the Athens Chamber of Commerce and Industry claims that the problem is not the actual decision to impose a tax on bank deposits but the lack of a proper policy for financial recovery.

"When taking a decision to break a long-lasting taboo, such as the property right and guaranteeing of deposits, this inevitably has its implications not only in the country in which the measure will be implemented, but also in other members of the monetary union and even in the world. This decision was wrong and unfair. I believe that the rulers in Europe will take the right path very soon." Mihalos believes that Brussels has to make a sharp turn in the policy pursued so far and that the European Central Bank has to loosen the monetary policy and introduce eurobonds at the same time. They will provide cheap lending for the real economy in Europe, which will stimulate the return of economic growth.

Meanwhile, the talks between the Cypriot authorities and the European lenders continue without yet reaching a common action plan. The Cypriot Orthodox Church has announced that it will put all of its assets at the disposal of the state in order for the country to be able to raise the 5.8 billion euro it needs. This act has provoked the sharp response of Greece, where the church had even lobbied to avoid the taxation of its property with the extra property tax.