Cyprus's new Finance Minister Haris Georgiades looks over during his brief ceremony oath affirmation at the presidential palace in Nicosia on April 3, 2013
Cyrpus finance minister Haris Georgiades

If anyone could justifiably complain about the predicament in which they had been placed, it would be Haris Georgiades.

Just a month after the new Cypriot government took office in March, Michael Sarris, the former World Bank economist serving as finance minister, abruptly resigned, saying his work negotiating Cyprus’s €10bn bailout was done. President Nicos Anastasiades surprised many by picking Mr Georgiades, a 41-year-old finance ministry newcomer to replace him. Mr Georgiades was made responsible for implementing the programme’s bank overhaul and tough austerity measures over the next three years.

But if the British-educated Nicosia native has any resentment over being handed such a poisoned chalice – or the process by which the bailout, which he helped negotiate, was agreed – he is not saying.

“It’s very tempting to go back and become part of the blame game: I will refrain from doing it,” Mr Georgiades said on the sideline of his first EU finance ministers’ meeting in Dublin. “One could have a lot to say about the way decisions were taken and then changed. One could have a lot to say about the warnings of the new Cypriot government itself. I will not get into such a discussion. We have a task ahead of us, and that’s where we shall concentrate our efforts.”

Cypriot officials acknowledge that Mr Georgiades got the job more out of political loyalty than his knowledge of international finance. A long-time party stalwart, he first headed Mr Anastasiades’ office when he was still opposition leader nearly six years ago, and became one of the small clique of loyalists that the president relied on during the final, fraught bailout negotiations.

With relations between Mr Anastasiades and Mr Sarris strained – the then-finance minister handed in his resignation before jetting off on a failed last-minute attempt to enlist the Kremlin’s help– Mr Georgiades became one of two close aides who finalised the deal with negotiators.

EU officials expressed annoyance at the time. “Anastasiades is not listening to any experts any longer,” complained one senior eurozone official involved in the talks. But Mr Georgiades said he believed the deal signed with the EU and International Monetary Fund could return the island to prosperity.

“We are determined to adopt and implement all those reform measures which we should have adopted a long time ago but we failed to do so,” Mr Georgiades said. “I am a pragmatist. I recognise difficult times are ahead but at the same time [amid] this bleak outlook, I am optimistic.”

Instead of relying on the country’s collapsed banking sector, which had been the source of Cypriot growth since the 1974 Turkish invasion, the government would instead focus on “traditional industries” such as tourism and shipping, and “developing new industries, such as energy”. The natural gas reserves that lie just offshore remain a tantalising prospect for returning to prosperity.

Mr Georgiades would not debate the growth projections contained in draft bailout documents that estimate Cyprus shrinking 12.5 per cent over the next two years but returning to growth in 2015 – figures that many economists believe are too optimistic.

But he said the chance of income from natural gas before the end of the three-year bailout could make those figures look more realistic. “These revenues have not been included anywhere,” he said. “It does not mean they will not be coming and this offers an answer to the sustainability of our debt.”

First, his government must survive the bailout’s immediate fallout. A stand-off with Cyprus’s central bank governor continues to threaten progress. Four bank board members have resigned over the governor’s performance. But Mario Draghi, the European Central Bank president, has warned against government moves to threaten to remove the governor from his job. Mr Georgiades says he will heed Mr Draghi’s warning.

Then there is the issue of Cypriots’ attitudes towards the EU. The island’s press continues to rail against the bailout and calls for an exit from the euro to be actively considered. But Mr Georgiades insists that Cypriots understand most of the problems were brought upon them by compatriots, not outsiders.

“Of course there has been a shock. We knew the time of reckoning would come and postponing decisions was not a wise policy,” he said. “This time of reckoning has come, there is frustration about the actual remedy that was offered to us but I do not think there is an anti-European feeling.

“Nor is there an approach which places the blame on anyone else but ourselves. It is our mistakes and our hesitation to take decisions that have led us to this difficult position.”

It will be Mr Georgiades’ job to navigate a way out.

Get alerts on Cyprus bailout when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article