Speaking at a conference of bank workers un ion ETYK in Nicosia, Christofias said the government was “greatly concerned” by the negative impact of the economic crisis on the banking sector.
Noting that the government was already in contact with the CB governor, the president said: “There must be an in-depth investigation into how we got to this point. We must see transparently how we got here and what measures we will take collectively to tackle this unacceptable situation.”
Christofias expressed his support to the workers, arguing they were not the ones who created the crisis or hurt the banking system. “Those who seek to unilaterally pass the burden on to the workers need to take that into serious consideration,” he said.
The president berated the EU and European Central Bank (ECB) for their “one-dimensional obsession with austerity” that focuses on a tight fiscal policy and reduction in workers’ incomes, adding that his government has consistently urged EU institutions to give emphasis to development, particularly in the real economy.
Addressing the conference, the Central Bank governor Panicos Demetriades said the EU’s fiscal pact, intended to deter governments from running up more debt, should be supplemented with action to stimulate growth.
“A strong safety net over employment and the living standards of citizens will put a stop to the further depletion of state revenues and, by consequence, a widening of deficits,” the new ECB policymaker said.
“An enrichment of the fiscal compact is required, or it should be combined with a strong framework of measures to stimulate growth.”
Demetriades, who took over from Athanasios Orphanides earlier this month, is a strong proponent of stimulus and has long argued that an austerity drive must not sap output – a view that has gathered weight in the eurozone with the election of Socialist Francois Hollande as French president.
In his first public address, Demetriades told the conference that a reduction in non-productive spending should be linked to an increase in the quality and effectiveness of spending geared towards growth.
“Maintaining the fiscal compact agreed by eurozone leaders is a significant step towards restoring fiscal balance, but further recession amplified by austerity feeds a vicious cycle between a reduction in output and a widening in fiscal shortfalls,” the British-trained former economics professor said.
“It is now understood both in Cyprus and in the eurozone that austerity by itself is not enough to bring the finances of any country back to a healthy basis, particularly when all the other countries of the EU follow the same policy,” he said.
Prior to his appointment, which gives him a seat on the ECB’s Governing Council, Demetriades had also expressed the view that the ECB should reconsider what he regards as an over-emphasis on inflation for defining monetary policy.
The ECB’s goals are modelled firmly on the commitment to restraining inflation espoused by Germany’s Bundesbank and credited with helping to make Germany one of the world’s most successful exporters.
Published on May 13, 2012