THE CYPRUS Stock Exchange (CSE) continued to fall yesterday for the third day in succession, as investors’ concern over the possible impact of Greece’s financial crisis drove down shares in the island’s three biggest banks, which all have operations and are listed in both Cyprus and Greece.
Shares in Bank of Cyprus (BoC), Marfin Popular Bank (MPB) and Hellenic Bank (HB) fell by 1.46, 1.72 and 2.73 per cent respectively, accounting for 98 per cent of the day’s trading volume of €5.36 million.
This followed losses of 7.83, 4.40 and 3.51 per cent respectively on Tuesday, and 1.70, 2.10 and 0.86 per cent respectively on Monday.
At one point yesterday, the CSE index had fallen by 3.8 per cent, but a late rally after 4pm saw the market close just 1.6 per cent down on Tuesday, when a drop of 6.32 per cent was recorded on traded volumes of €8.62 million. The CSE closed 1.78 per cent down on Monday, on €3.45 million traded volumes.
Markets throughout Europe and the United States tumbled on Tuesday following a downgrade of Greece’s debt rating to “junk” status – regarded as non-investment or speculative grade because of its high default risk – by ratings agency Standard & Poor’s, which also downgraded Portugal’s rating.
Markets around the world were still jittery yesterday over the continuing uncertainty over Greece and the risk of “crisis contagion” to Portugal and other debt-laden EU countries.
Concerns that Greece could default on its next debt payment, which is due on May 19, were mitigated to some extent yesterday when Germany’s Finance Ministry softened its tone by indicating that it could approve its contribution to an aid package within days, if the Greek government succeeds in finalising an acceptable package of austerity measures.
Meanwhile, according to a Financial Times report on Tuesday, the International Monetary Fund (IMF) is in talks to increase its share of the planned €45 billion financial aid package to €25 billion, leaving the rest to eurozone members.
European Council President Herman Van Rompuy announced yesterday that the EU will hold an extraordinary summit meeting in Brussels on May 10, the day after regional elections in Germany that are crucial to Chancellor Angela Merkel’s coalition – which some pundits are saying explains Germany’s hard line. Greece will hope that agreement can be reached ahead of May 19, when around €8.5 billion of its debt will reach maturity.
Today, the House of Representatives will consider approving some €60 million – at this stage mooted to be in the form of a three-year loan with a fixed interest rate of around five per cent – as Cyprus’ contribution to the economic aid plan for Greece being put together by the EU and IMF.
Speaking to reporters yesterday evening, Finance Minister Charilaos Stavrakis said that this loan would probably not affect Cyprus’ fiscal deficit, adding that “it will simply affect public debt” to the tune of around 0.4 per cent of GDP.
In fact, Cyprus’ contribution will be the second smallest among the euro zone countries, just ahead of Malta’s €30 million. By contrast, Germany’s share is the biggest at €8.4 billion, followed by France with €6.3 billion.
The aid package process requires the parliament of each contributing country to approve its share, ahead of the European Commission converting these into a single loan.
EDEK vice-president Marinos Sizopoulos said yesterday that although his party will vote to approve the aid contribution, “Cyprus should heed the warning of what is happening in Greece and move ahead quickly with solving the economy’s serious long-standing structural problems, so that we can avoid a similar eventuality.”
