Social turbulence for the Cypriot president

N. Anastasiades was reelected in the February 2018 presidential elections enjoying a strong majority over his opposition: 56% to 44%. Following a very intense electoral campaign where all major policy issues were harshly contested, the result was thought to have given the current president space for implementing his policies both in internal affairs and the Cyprus problem. However, this assessment proved short-sighted and failed to grasp the complexities of Cypriot politics.

Immediately upon his reelection and in a period of just five months the new government has been confronted with a number of problems that created an atmosphere of social turbulence. All these contested issues touch upon fundamental aspects of the government’s policy. Currently, these issues include the economy and the education system. Before these, it was the medical doctors of the public sector that collided with the government over the character of the health system on the island, whereas a couple months ago hundreds of environmental activists protested in various parts of the island against government decisions favouring big developments (skyscrapers) on the coasts of Cyprus, as well as in environmentally protected areas incorporated in the EU’s Natura 2000 network.

In the economy, Cyprus experienced once again the fear of a bail-in, similar to that of March 2013; this time the focal point was the Cyprus Cooperative Bank (CCB). CCB has a 110-year history in Cyprus and is currently a large, systemic bank (the third largest bank in Cyprus). The CCB focuses on retail banking, serving some 400,000 Cypriots with more than 30% of the total deposits. Given the problems faced by this bank the government decided, back in September 2013, to inject money and put it under its total share capital control. Since then, it has become very obvious that the right-wing government of N. Anastasiades favoured the privatization of the CCB but was unable to do so in its first tenure because of the reactions of the opposition and other social actors.

Eventually, and despite the opposition’s resistance, the government began the process for privatizing the CCB, while also making it clear that they preferred another local bank (Hellenic Bank) to take over. Some misguided (some say targeted) statements by government officials and rumours for a forthcoming bail-in unless the parliament authorized the privatization of the bank resulted in a bank run from the CCB. Withdrawals totalled €1.9 billion in the first three months of 2018.

The deal, as it was negotiated, would have led to the Hellenic Bank acquiring the “good part” of the CCB (deposits and assets) and for the government to take over the “bad part” (i.e., the non-performing loans). This deal has generally been viewed as very favourable for Hellenic Bank, but bad for the Cyprus tax-payer. As pointed out by the press (and also the opposition), the deal could prove to be very expensive for the central government and ultimately for the tax-payer. The government issued Development Bonds totalling €3.35 billion to bolster the ‘good part’ of the CCB, raising the public debt to GDP ratio from 97.5% to approximately 120%. In addition, the government has agreed to protect the assets of the Hellenic Bank by providing guarantees which could eventually be very costly if exercised. Furthermore, the government has agreed to make redundancy payments to the 1000-plus employees of the CCB who are expected to be laid off as a result of the deal.

Notwithstanding the positive vote that the (scant) majority of the parliament gave to the government’s bill on this issue, criticism has been very strong by most political parties (even those that supported the legislation). Most of the criticism has targeted the Minister of Finance whose resignation was demanded; the president and his overall economic policy was also targeted as one that favours big capital. A protest was also organized by a civil society group, the Movement Against Foreclosures, in the capital city of Nicosia and was backed by some of the opposition parties.

And while the fire from this issue was still burning another one lit up. This time it was the teachers associations of primary and secondary education that protested against government decisions. Thousands of teachers, parents and students gathered outside the education ministry in the sizzling heat to demand the resignation of the Education Minister. The pretext for the row focused on a cabinet decision to abolish exemptions from teaching hours for trade union activities and extra-curricular activities, and fewer hours for teachers with many years of service. However, the teachers were quick to introduce wider issues relating to the overall government policy towards the pubic character of the education system in Cyprus. Protestors chanted ‘give up’ and ‘hands off education’ in front of the ministry. According to most sources it was the most massive demonstration held in Nicosia in recent years gathering thousands of protestors. The unions have threatened to strike in September if the problems are not solved.

Demonstrations and opposition to government policies by various parties, unions and social groups reveal important underlying social tensions and show that the president has a difficult path to cross in his second and final term. His policies favouring a smaller state will probably be at the heart of discussions and it must be taken for granted that they will provoke strong opposition. With the negotiations for the Cyprus problem expected to resume in the fall, the government cannot operate in such a tumultuous environment. A more consensual approach will be probably sought in the forthcoming days and weeks.

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