Cyprus finance chief quits on eve of bank-crisis inquiry

Bailout decisions drew many foes

Michalis Sarris (right) had been under pressure from lawmakers.
Michalis Sarris (right) had been under pressure from lawmakers.

PARIS — Michalis Sarris, the finance minister who negotiated Cyprus’s bailout agreement with international creditors, resigned Tuesday, citing the beginning of a government inquiry into the collapse of the country’s banking industry.

President Nicos Anastasiades accepted the decision, and the government quickly appointed Harris Georgiades, deputy finance minister, as Sarris’s replacement.

On the heels of Cyprus’ $13 billion bailout, announced last week, a political blame game has broken out. Sarris has faced strong criticism for his handling of the crisis and had been under pressure from some factions in Parliament to step down. He is also one of several people facing an investigation into his role in the banking crisis.


Before taking the helm as finance minister in the government that came to power in February, Sarris had presided over Laiki Bank, which effectively collapsed last week. Laiki is being merged into Bank of Cyprus in a deal that will see depositors lose up to 60 percent of their savings in excess of 100,000 euros.

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On Sarris’s watch, a stint of eight months through August in which he attempted to salvage Laiki, the bank suffered steep losses, mostly on loans to Greek and Cypriot businesses and individuals that turned toxic. Cypriot banks also took a hit from heavy holdings of Greek government bonds, which incurred big losses in the international bailout of Greece.

Some restrictions on removing money from banks were softened on Tuesday. They had particularly hurt businesses that were not permitted to make large payments on debts 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.

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 stop using 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.


Sarris was on the front lines of the bailout negotiations, which led to one aborted deal more than two weeks ago, followed by the final agreement early last week.

“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,’’ where he had sought financial aid, said Mujtaba Rahman of Eurasia Group.

The main provisions of the bailout will remain in place, including the breakup of Laiki Bank and the overhaul of Bank of Cyprus. But Parliament must still vote on a memorandum of understanding with the so-called troika — the European Central Bank, European Commission, and International Monetary Fund — that agreed to the bailout. It will outline the budget cuts and other conditions Cyprus would have to meet to receive its allotments of money.