* Christofias says draws line at privatisations, withholding
* Says island is preparing counterproposals
* Cyprus sought aid in June
By Michele Kambas
NICOSIA, Oct 3 Cyprus will not accept a bailout
from international lenders on the current terms being offered,
President Demetris Christofias said on Wednesday, with the
indebted government set to propose alternative savings.
Setting the tone for tough negotiations with lenders,
Christofias said he would never sign a bailout deal which called
for the sell-off of profitable state-owned enterprises, or which
would abolish inflation-linked salary increments.
It was the first time Christofias explicitly ruled out
lending proposals as they presently stand, though officials have
frequently said they considered the proposals non-binding and
"building blocks" towards a deal.
A draft economic adjustment programme prepared by the
European Commission, the ECB and the IMF and submitted to Cyprus
in July called, among other things, for ending wage indexation,
known as CoLA, and embarking on a privatisation programme.
"We aren't just saying 'no' to them," Christofias told Greek
state broadcaster NET in an interview. "We are giving them
counterproposals. They are being prepared, we are in the very
final stages and which will provide for as much in savings as
they (the troika) wants," he said.
Cyprus sought aid in June after its two largest banks
suffered huge losses on their exposure to Greece, forcing them
to turn to the government for aid.
The island, shut out of capital markets for 15 months and
wrestling with its own fiscal imbalances and its first recession
in almost 40 years, applied for a comprehensive bailout.
WARY AT GREEK EXPERIENCE
Wary at the Greek experience, Cyprus has attempted to put
down markers of how far it can go; government officials have
frequently been critical of the bailout conditions imposed on
Greece, and the island's ruling communist party has said an exit
from the euro zone could even be considered if their terms were
"This neo-liberal method of dealing (with the crisis) is
bankrupt," Christofias said, referring to Greece. "Its a vicious
cycle,a Sisyphean task."
He also took aim at a perception southerners were too laid
back. "As Cypriots we consider this an insult.. we re-built
Cyprus in three or four years after losing 70 percent of our
economy," he said, referring to a war in 1974 which split the
island into two and displaced thousands.
Cyprus is the third-smallest nation in the 17 member euro
zone. The bailout amount has not been defined, but Russia, a
close business and political ally, last week said Cyprus
required 15 billion euros from the EU.
Nicosia has also sought a 5 billion euro bilateral loan from
A significant chunk of that amount is believed to be for
banks, which expanded aggressively into the Greek market in the
past decade but are now attempting to ring-fence their
"What happened with the banks was a crime," Christofias
The ministerial cabinet was due to meet on Wednesday evening
to finalise counter-proposals and Christofias was scheduled to
meet party leaders on Friday for further discussions.
Scrapping CoLA and halting payment of year-end bonuses in
the broad public sector is unlikely to go down well with a
highly-unionised workforce, particularly ahead of a general
election in February 2013.
Christofias, elected in 2008 and with close ties to labour
unions, has said he does not plan to seek a second term.
"You cannot tell someone they won't receive a 13th
(month's)salary. It automatically means you paralyse the
market," Christofias said.
"I can assure you, I will not sign any memorandum which
scraps CoLA. The same applies to two or three other measures,"
he said, referring to the 13th month's salary and