President Nicos Anastasiades accepted the decision by Mr. Sarris to step down, and the government quickly appointed Harris Georgiades, the deputy finance minister, as his replacement.
On the heels of Cyprus’s 10 billion euro, or $13 billion, bailout announced last week, a political blame game has broken open in the halls of power. Mr. Sarris has faced strong criticism for his handling of the crisis and had been under pressure from some factions in the Cypriot Parliament to step down.
He is also one of several people now facing an investigation by Cypriot officials over his role in the country’s banking crisis. Before taking the helm as finance minister in the government that came to power in February, Mr. Sarris was chairman of the board of Laiki Bank, which effectively collapsed last week. Laiki is being merged into the Bank of Cyprus in a deal under which depositors will lose up to 60 percent of their savings in excess of 100,000 euros.
Under his watch, a stint of eight months through August 2012 in which he tried to salvage Laiki, the bank suffered steep losses, mostly on a mountain of soured loans to Greek and Cypriot businesses and individuals. Cypriot banks also took a hit from their heavy holdings of Greek government bonds, which incurred big losses in the international bailout of Greece.
On Tuesday, some of the curbs Cyprus imposed on removing money from banks were softened. The restrictions had particularly hurt businesses that were not permitted to make large payments on debts they owed in the past two weeks.
The Finance Ministry lifted the ceiling on transactions between accounts and other banks to 25,000 euros from 5,000 euros. Other restrictions remain in place, including 300 euro daily withdrawal limits.
Mr. Anastasiades on Tuesday appointed a three-judge panel to look into how and why Cyprus edged close to a financial disaster that threatened to make it the first country to exit the euro. In a speech, he said the crisis arose from inept actions and omissions by people in charge of the banking sector and the economy.
Mr. Sarris had been at the front lines of the bailout negotiations, which led to one abortive deal more than two weeks ago in Brussels, followed by the final agreement early last week.
The most contentious decision in the first deal, which the Parliament rejected, would have imposed a 6.75 percent tax on bank deposits of less than 100,000 euros. Before it was abandoned, the plan was roundly criticized by economists in Europe and elsewhere as threatening the integrity of the deposit insurance system throughout the 17-country euro zone.
It was agreed to by Mr. Anastasiades in consultation with Mr. Sarris, who presented the deal to the Cypriot public in a televised news conference from Brussels on March 16.
After the Cypriot Parliament roundly rejected that plan, Mr. Sarris flew to Moscow to seek alternative sources of funding for Cyprus and its teetering banks. Those talks went nowhere.
“Mr. Sarris’s credibility was at near zero both nationally and with foreign lenders after he supported the first failed plan to tax depositors and then returned empty-handed from Moscow,” said Mujtaba Rahman, a senior analyst at the Eurasia Group.
The main provisions of the bailout deal will remain in place, including the breakup of Laiki Bank and the overhaul of the Bank of Cyprus.
But the Cypriot Parliament must still vote on a memorandum of understanding with the so-called troika of international organizations — the European Central Bank, the European Commission and the International Monetary Fund — that agreed to the bailout.
That memorandum, still being drafted, will outline the budget cuts and other conditions Cyprus will have to meet to receive its allotments of money. A parliamentary vote is expected in coming weeks. The governments of Germany and Finland, under their national rules on bailout loans, are also expected to seek the approval of their Parliaments.
The memorandum will probably be the subject of heated debate in Nicosia. Many lawmakers, already unhappy with the tough capital controls that have been slapped on bank accounts for the better part of a month, are dismayed by what they see as harsh terms that will tip Cyprus’s already enfeebled economy over the edge.
But Mr. Sarris’s resignation should “help the Cypriot government win approval for the bailout program in the Cypriot Parliament,” said Mr. Rahman, the analyst.
Michael Olympios, chairman of the Cyprus Investor Association, is among the many critics of the bailout deal because it wiped out the shareholders of Bank of Cyprus and will impose losses of up to 60 percent on depositors with more than 100,000 euros in their accounts.
“The troika is pushing us from recession to depression,” Mr. Olympios said, adding that the country may yet need to leave the euro zone. “It doesn’t matter if Mr. Sarris leaves and someone new comes in. If you don’t change the policies that are being imposed on us, then forget it.”
Article source: http://www.nytimes.com/2013/04/03/business/global/cypriot-finance-minister-resigns.html?partner=rss&emc=rss
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