President of the European Investment Bank (EIB) Werner Hoyer said the March 25 Eurogroup decision for a haircut on bank deposits was very difficult and very painful, noting however that everybody should learn from the past and make sure that something like this does not happen again. “Nobody was happy about the necessity to take such a decision,” he added.
Noting that he does not want to present a picture that it is too nice, Hoyer said he recognizes fully the depth of the problem and the suffering of the people. Nonetheless, he expressed optimism that Cyprus can return to a good economic performance if the restructuring of the Bank of Cyprus is concluded successfully. He called for patience andresilience by the people of Cyprus, expressing at the same time his appreciation for the efforts of the Cypriot Government to clean up the mess of the past. The investigation process into mistakes of the past relating to the economy must take place, he explains, becausethis is not only a legal question, but also an ethical question. However, he believes that people should look to the future.
The German President of the EIB sent a strong message for the future of the Eurozone and the EU in general, underlining that strengthening the idea and the substance of European integration is the key to Europe’s survival in a competitive context worldwide. Assessing the outcome of his contacts in Cyprus, Hoyer said the EIB has high expectations and he has the feeling that these expectations are being met. “The talks were very constructive, good to the point and taking into consideration that the EIB is resolved to continue and expand its business on Cyprus, this is not the case for every Bank, so this is a clear commitment of the EU expressed through its Bank, to help”, he said. He added that EIB and the government of Cyprus signed a very important agreement for 100 million euro, which came on top of the 200 million for National Strategic Reference Framework (NSRF). “The NSRF was fully dispersed and went very well and I am quite sure that the 100 million will go just as well”, he noted.
Asked how optimistic he is that Cyprus would achieve growth and tackle unemployment, the President of EIB told CNA that he is not only “a structural optimist”, but he is an optimist when it comes to the concrete case. “I do not want to present a picture that it is too nice, I am aware of the depth of the problem, I am aware of the suffering of the people, I am aware that it takes a lot of resilience and patience by the people. But, from an overall point of view it is decisive whether the track goes into the right direction and this is certainly the case”, he said, underlining that if the restructure of the Bank of Cyprus is concluded successfully, then Cyprus has very good perspective to return to a good economic performance.
Replying to a question on the sectors on which Cyprus must focus to achieve growth, Hoyer acknowledged that the banking sector has been the source of great progress in Cyprus for many decades and the source of wealth that has been accumulated here and it has been part of the attractiveness of Cyprus. “Now we all know that this sector is irresponsibly overblown, so there was a need to come to a painful end. We are there now, so we need to learn the lessons. One of the lessons is that we need to reestablish trust in banks, because banks are the foundations of any economy”, he stressed. He pointed out that getting a serious business plan again in banking sector will be key to this effort, adding that tourism has still huge and unused potential, and that there is a lot of perspectives in the sector of small and medium sized companies which are suffering particularly.
Asked how the EIB oversees the proper utilization of funds lent to Cyprus, Hoyer said this is a very important point because for accountability is a priority. “We are a public Bank, we are owned by the 27 member states, we are part of the EU Treaties since the Treaty of Rome. So, we are accountable to the European Parliament, the European Court of Justice, the European Court of Auditors and of course to the 27 member states. We are cooperating very well with the Commission by combining the grants of the Commission with the loans of the Bank and the technical advice we can provide”, he explained.
He noted that when the EIB lends money to somebody in Cyprus, the Bank wants to make sure that this money ends in the direction in which it was agreed. “The pressure is on, the monitoring system is one of the biggest departments of the Bank, it continues monitoring until the loan has been fully used and at the end of the day we must not forget that the loan should be fully repaid”, he added.
Asked to elaborate on the total amount lent to Cyprus, the rate and the repayment period, the European official said that since the beginning of the membership of Cyprus to the EU, the Bank dispersed 2.7-2.8 billion Euros to Cyprus. “Over the past five years we signed and dispersed 1.3 billion and I think as soon as the banking sector is restructured and we can directly lend the banks, it will be different. As for the repayment period and the rate, it can be said in very general terms because every loan is decided on different basis. The interest rates of the EIB loan normally is 1.5 to 2.5% lower than the interest rates you have to pay with other sources”, he explained. Asked if the EIB would consider a change in the terms of the loan if requested by the Government, Hoyer said that these loans cannot be compared with the loans of international institutions. “This is a completely different story, we do not speculate, we do not deal with questionable papers, we do very clear and precise loan conditions and take into consideration the difficulties of the country and the economy, like the Cypriot one”, he said.
Invited to comment on the Eurogroup decision on Cyprus, on March 25, for a haircut on bank deposits over 100,000, the President of the EIB said it is not his business to comment on it. Nevertheless, he said that it has been a very difficult, very painful decision taken by the Finance Ministers of the Eurogroup, unanimously. “I will stay away from commenting on that. I think that nobody was happy about the necessity to take such a decision and the main conclusion which we all should take from this is to learn from the past and make sure that something like this will never happen again”, he said. Asked if he considers this decision a bad one, Hoyer said that if a banking sector is so overblown, then one must do something about it. “On the other hand it is vital to return to trust and confidence in the banking sector and only if the citizens are sure that the bankers are not driven by greed but by solid ethics in the banking business, we can expect this confidence to return. And we all ought to work on the return of this trust because without a functioning banking sector no economy works”, he pointed out.
Asked about the Eurozone exiting the crisis stronger, Hoyer said that one must not lose the overall picture. “And the overall picture is to talk about Europe’s competitiveness in a globalizing world. We must strengthen Europe at all of its places and that means let’s not only look back, let’s look forward and see what the competitive edges of Europe are, where we still can reach them and get stronger because the non European world is not sleeping and the progress made everywhere in countries which the Europeans would arrogantly looked down to them a few decades ago is remarkable”, he stated.
“If we want to survive in this competitive context worldwide, then we must strengthen Europe and that also means that even the biggest countries in the EU will not be able to stand alone. So, strengthening the idea and the substance of the European integration is key. We need more Europe, not less”, he concluded.
Source: Financial Mirror