THE CYPRUS bourse rallied strongly yesterday, as European stock markets rushed to regain part of their huge losses in the past few weeks amid a climate of euphoria after the announcement of a rescue plan by the leaders of the 15 eurozone countries.
With banks leading the way, the CSE general index gained 12.89 per cent. Shares in the Bank of Cyprus (BOCY) soared 11.06 per cent to €5.22, Marfin Popular Bank (CPB) jumped 16.67 per cent to €3.22 and Hellenic Bank (HB) surged 15.69 per cent to €1.77.
Elsewhere, London, Frankfurt and the Paris markets recovered some of their losses.
It was an impressive comeback after the CSE went into freefall Friday, recovering in the nick of time to close at eight per cent down. More bad news came after the government said it was revising economic growth downwards for 2009.
By yesterday jittery investors regained their confidence, with the volume of trading standing at a vibrant €7.6 million.
The rebound followed an announcement by European leaders on Sunday to help banks through the worst financial crisis since the 1930s, pledging before panicky world markets reopened that any solvent institution would get public funding if needed.
Governments agreed commitments to provide capital for banks caught short of funds because of frozen money markets and to insure or buy into new debt issues, a summit statement said.
The root cause of the crisis was a US housing boom that went bust, and with it a market in mortgage-related debt and derivatives that turned toxic with the downturn. That marked the start of a credit squeeze a year ago that snowballed worldwide.
Speaking to newsmen from Paris, where he attended the hastily convened summit on Sunday, President Christofias called the promised help a “clear-cut state intervention [in the economy].
“Despite the fact we have a free-market system – an anarchical market system I might add – the leaders were forced to decide government intervention in order to rescue the banking and financial sectors,” said the communist President.
But unless governments tackled the core cause behind the crisis, the above measures would only serve as a quick fix, he warned, repeating his remarks before the summit.
“Some calculated state intervention will always be necessary…this is my view. What is happening now to the economy is a hard lesson which I hope is learned.”
Last week Finance Minister Charilaos Stavrakis said he was working on a contingency plan for a prolonged global crisis. And the government says it can muster up to €1.9 billion to bail out banks if push comes to shove.
Weighing in, the Central Bank yesterday repeated that the banking sector in Cyprus is “safe and robust.”
Meanwhile a major brainstorming session on the outlook of the economy took place yesterday at the House Finance Committee. It was attended by representatives of commercial banks, the ministries of Labour, the Chamber of Commerce and the hotel industry, among others.
Concerns over the possible impact on the economy were raised by people from the fields of tourism, trade and shipping. For their part, the relevant ministries said unemployment and money-making numbers were holding up, but promised to keep track of developments.
Local analysts are forecasting an economic slowdown, but have all but ruled out a recession.
