Wednesday, 27 March 2013

Pissarides questions Cyprus’ future in the euro

Above is another video clip of Christophoros Pissarides, the Cypriot Nobel prize-winning economist and head of the island’s Economic Policy Council, this time explaining to Bloomberg TV the ramifications of Cyprus’ bailout deal and wondering whether Cyprus should now abandon the euro. Pissarides is clearly furious and incredulous that Germany (essentially) has decided at a stroke, disdainfully, unnecessarily and unjustifiably, to terminate Cyprus as a financial services centre, without any apparent sensitivity to the fact that much of Cypriot society – particularly the education system – was oriented towards accommodating the economic model the country had developed over a period of 40 years.

Below are a couple of things Pissarides says in the interview:

‘The implications for the Cypriot economy will be a disaster. The only good thing about it is that the uncertainty has been resolved. But that’s like saying, “I’ve got a pain in my leg”, I go to the doctor, he cuts the leg off and we say “it’s good that you don’t have the uncertainty about that pain anymore”.’

‘Cyprus developed as a small economy with a highly educated labour force – the most highly educated labour force in Europe in terms of university degrees – and concentrated on business and financial services. And now the German finance minister and others are telling Cyprus, “This is not a good model of economic development for you. You have to think of something else”. Now, what do those qualified people do – all those people who have degrees in accounting, finance and banking studies from British universities? They become unemployed or leave the country.’

1 comment:

Hermes said...

I understand Pissaridis is angry at this stage of the crisis. However, when things being to settle a bit, I hope for the sake of Greek Cypriots and Greeks, that Pissaridies will tell the truth. The best friends are the ones that are honest rather than the ones that tell you what you want to hear.

Putting aside for a second the brutality of the IMF, EU and German diktats, the fact that Cyprus developed very lax banking standards (even before the Greek PSI, Laiki was deteriorating fast), was very slow in responding by cutting government expenditure below revenues when it became obvious that the banks were very unhealthy, they did not have the wherewithal to recapitalize its banks; the responsibility of this should not wholly fall onto the German and northern European taxpayer. They were prepared to provide most of the funds but not all of them. Also, why would they really care if Cyprus has many accounting and finance graduates. If Germany suddenly priced itself out of exports markets, and thousands of engineers become unemployable, should Greece and Cyprus be expected to pay for that? The Greek Cypriots orientated its economy a certain way; and in turn, churned out certain skills, but did not get the basics right.

As for assertion that Cyprus has the most educated workforce in Europe is very questionable. The percentage of tertiary degrees may be high but on many other education indices Cyprus ranks quite low. Often, lower than Greece. I think Pissarides is looking at the statistics the wrong way. The high number of tertiary degrees is not really a sign of a strong and educated workforce but a sign that the areas where the economy was orientated required tertiary degrees. For example, Luxemburg also has a high proportion of tertiary degrees.

John, you linked to a video of Chris Pavlou, ex VP from Laiki Bank. So far, he is one of the most honest voices I have heard so far.