Cyprus leader plans big crisis reshuffle

2011-07-28 08:56

Nicosia - Cypriot President Demetris Christofias will seek the resignation of his cabinet on Thursday in the face of public anger at an accidental munitions blast that destroyed the island's biggest power station and threatens it with a financial meltdown.

Paving the way for a reshuffle, Christofias will ask all members of his cabinet to step down at a meeting scheduled for 06:30 GMT, government spokesperson Stefanos Stefanou said.

On Wednesday, the junior governing partner in Cyprus's centre-left coalition, the Democratic Party, said it had asked its ministers in government to bow out in a bid to expedite its own call for a cabinet reshuffle.

"The President of the Republic intends to proceed with a broad reshuffle...[He] has convened for tomorrow an extraordinary session of the Council of Ministers and will ask all ministers to place their resignations at his disposal," Stefanou said in a statement.

Facing its most serious challenge yet, Christofias' government could face a bill of at least $1.44bn for the explosion on July 11, which an overwhelming majority of Cypriots blame on state incompetence and negligence.

The blast killed 13 people and knocked out half of the island's power supply.

Rating cut

On Wednesday, Moody's cut Cyprus's sovereign credit rating to Baa1, three notches above junk status, and warned another downgrade was possible, highlighting the energy crisis and exposure of its banks to Greek debt.

Since the blast, markets have trained their sights on the east Mediterranean nation as a possible fourth recipient of a euro zone emergency rescue after Greece, Ireland and Portugal, and political wrangling now risks derailing much-needed economic reforms.

Last week, the island's central bank governor and European Central Bank governing council member, Athanasios Orphanides, warned that without immediate action Cyprus may need a bailout.

Two of Christofias's 11 ministers, of foreign affairs and defence, have resigned since the blast.

The munitions, confiscated from a ship sailing from Iran to Syria in 2009, were stored a few hundred metres away from a power station on the south coast in often scorching conditions, despite appeals from army officers for their removal.

Christofias has said an inquiry into the incident will also scrutinise his own rule, though aides have repeatedly said he was unaware of the deteriorating storage conditions.

There have been calls for Christofias, a Communist whose term expires in 2013, to step down, but that appears unlikely. As leader of Cyprus's dominant Greek Cypriot community, he leads reunification talks with estranged Turkish Cypriots to clinch a peace deal to end decades of conflict.

The absence of such a deal is harming Turkey's bid to join the EU.