Decisions regarding the co-op bank in Cyprus might have been different, a senior European Commission official told MPs on Tuesday, but noted that the option eventually settled upon was “not too bad.”
“Now with the benefit of hindsight we might have done things differently and decided differently, but I think all in all the solution does not look too bad,” said Manfred Bergmann, of the Directorate General for Economic and Financial Affairs.
He was meeting MPs of the House finance and labour committees following the European Commission’s 2019 report for Cyprus, published in February.
“The only thing that happened, is that what were non-performing loans in the banking sector are now non-performing loans in the public sector via the special entity we have created for this,” Bergmann said.
He was alluding to the decision by Cypriot authorities to sell the performing operations of the co-op bank to Hellenic. The co-op bank has since lost its banking licence and has been renamed to Cooperative Asset Management Company, which will wind down non-performing loans amounting to €5.7bn.
The decision had the blessing of the European Commission.
Bergmann went on to warn that Cyprus has the “major disadvantage” of being a small and open economy, making it vulnerable to external shocks.
The Cypriot economy, he added, is based on tourism, construction and the golden visas scheme and “these are issues which might be very fragile.”
Bergmann pointed out that civil servants in Cyprus seem to enjoy both high salaries and job security, unlike in other EU member states where their positions may be secure but they receive lower wages by comparison.
“In Cyprus they have both high wages and security, it sounds like having their cake and eating it.”
On the need for privatisations, Bergmann said this is not doctrine as far as the European Commission is concerned.
“But,” he added, “if you don’t want to go for privatisation in the fields where you have monopolies, such as telecommunications or energy, you need a plan B so that at the end of the day the result is good.”
Noting that Cyprus needs to transition to a new economic model, the official advised political parties to set aside their differences to pass reforms.
Since the ruling party lacks a majority in parliament, he added, “you don’t have the luxury of confrontation between the government and the opposition. More cooperation is required.”
Bergmann was responding to Disy MP Onoufrios Koulla, who suggested that the European Commission tends to meddle in the tax or welfare policies of individual member states.
For her part, Director for Employment and Social Governance in the Commission’s Directorate General for Employment Barbara Kauffmann said Cyprus has seen a significant increase in part-time employment and in informal labour, which was a concern.
The European Commission has proposed that Cyprus undertake a series of reforms in the public sector, education and the judiciary.
It additionally advocates for steps to ensure that a national health scheme be fully operational by 2020.
