articles | 26 December 2014

Cyprus on the road to recovery

Finance Minister Harris Georgiades is pleased that 20 months after the bailed-out island’s near meltdown, the economy and banking sector is stable with every quarter improving on the previous one.

But he told The Cyprus Weekly in an interview that the economy is not there yet and the road towards complete recovery is not covered with roses. For a start, external factors such as the rouble’s nosedive will certainly have an impact on major tourism market Russia. “We are concerned regarding tourist arrivals, because that’s where the impact of the steep devaluation of the rouble could have a more direct effect on the Cyprus economy,” Georgiades said.

“We have not exactly seen a significant impact on business services so far,” added the somewhat relieved minister who quickly pointed out that recovery remains fragile. Fragile or not, Georgiades refuses to refer to the term bailout programme arguing that Cyprus “has passed that. It’s not a bailout programme; it is a programme of reform, consolidation and growth of the economy”.

However, the challenge is to essentially establish a new viable growth model for the Cyprus economy. And parliament’s helping hand is more than essential to enable the once flourishing EU member state return to international markets sooner rather than later.

“I would say that if we continue to show that we are implementing our programme of reform and consolidation that would definitely ensure that we shall continue what has already started, the re-establishment essentially of market access,” Georgiades said. “That is the key and that’s what the government is determined to deliver,” he added.

But last week’s majority vote by parliament to postpone until January 30 the implementation of foreclosure legislation – controversial but mandated by the Troika of international lenders – dented Cyprus’ credibility.

“I’m not so much concerned about our cash reserves but about our credibility reserves. Those were even more depleted in early 2013.”

“We have been re-establishing this credibility and we have established the credibility reserve if I can refer to it in such a manner. Under no circumstances should we be taking steps or making decisions that could endanger the re-establishment of our credibility, both domestic confidence but primarily the international confidence in our economy.”

The Minister described the decision – which led to the disbursement’s postponement by IMF by a couple of months – as ‘regrettable’, ‘unnecessary’ and ‘without any real substance’.

“Despite disagreements, criticism and sometimes rhetoric, it was a parliament which supported and did what it should have done… I choose to believe that this won’t be repeated with other items on our reform agenda.”

The foreclosures bill as it stands is not fully effective, anyway, and cannot be implemented without supplementary legislation, which is getting finalised at the Ministry of Interior. “We had an end of December timeframe, two of the five insolvency bills have been presented to the House in early December, a third one was presented last Tuesday and the remaining two will be finalised over the next few weeks.”

“If you have an end of December time frame and this relates to five pieces of legislation and the two have been presented early December, the third in mid December and the remaining two (to be submitted) early or mid January, I do not think we are off our time frame.”

Source: InCyprus

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