Cyprus's former communist president and his government bear chief blame for the island's financial meltdown in March after they failed to control spending and behaved in an imperious manner, an independent judicial inquiry said on Monday.
The findings of a three-member panel commissioned by the current center-right government described how fiscal surpluses turned into runaway deficits, unemployment trebled and Cyprus was shut out of international financial markets on the watch of its previous communist rulers, in power from 2008 to early 2013.
Former president Demetris Christofias, who refused to testify to the independent panel, saying it had no mandate, swiftly dismissed the report as “full of untruths”.
The panel does not have executive powers but the probe adds to a growing mesh of recriminations over the parlous state of the 17 billion euro economy following the crisis.
“It's reasonable to conclude that the (former) president and the government functioned with the mantra 'I'm in government, I do what I like,”' said George Pikis, a former chief justice who headed the panel.
In a messy 10 billion euro bailout agreed in March, international lenders forced the closure of a major bank, Laiki, and the seizure of savings from large depositors to recapitalise a second troubled lender, Bank of Cyprus.
Both banks had suffered huge losses from a writedown in the value of Greek government bonds, an arrangement brokered by EU leaders in late 2011 to make Greece's debts more manageable.
When their losses became unsustainable, the Cypriot banks turned to the state to bail them out, but this proved unaffordable for a government running high deficits and unable to access capital markets.
Lenders from the IMF and the EU refused to offer aid to recapitalise the banks, worried that Cyprus would be saddled with unsustainably high debt, and forced a raid on deposits.
The judicial probe, which has been forwarded to authorities for further consideration, said Christofias had agreed to the Greek bond write-down without considering the consequences. He had also ignored advisors and his delay in seeking international assistance was “inexcusable”, Pikis said.
“He had no (concept of his) limits,” Pikis said.
Christofias accused the panel of ignoring what he considered to be the main causes of the crisis - greedy bankers over-exposing themselves to risk and an ineffective regulator.
“It is an illegal committee... which concluded on a text laced with untruths and slander,” he said in a statement.