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articles | 03 November 2015

Cyprus plans no bailout extension

Cyprus has no plans to extend the bailout programme when it expires in early 2016, Finance Minister Harris Georgiades said at The Economist Summit, but nor will it try to exit early.

“We shall be completing the support programme early next year and we shall not be requesting an extension”, he said, adding that the government would not be requesting a standby support programme either.

Asked whether Cyprus would exit the programme before the March deadline, the minister said: “We are almost done already … tomorrow we will start a new round of review by the troika institutions…this review process will carry us probably until the end of January if all goes well so inevitably we are reaching the end.”

Technically the troika has two more reviews including the current one before it expires. However, there had been rumours that the government would try to exit early.

In what sounded like an election campaign speech for a minister who is rumoured to be planning to quit office in order to stand for parliament in the elections next May, Georgiades said that his government had inherited public finances “in a dismal state”.

“We essentially balanced the budget over a single year, exceeding the troika requirements… we did the job and then we kept it steady,” he said.

Referring to the tax rises imposed by the former communist AKEL government, he said, “There is an assumption that maintaining high public spend and running a sizeable budget deficit is actually a growth-friendly policy. The Cyprus example confirms that exact opposite.”

The government recently introduced tweaks to tax reforms in property taxation and taxation of high net worth individuals aimed at supporting the property market and encouraging international businesses to locatein Cyprus.

“This tax reform is already delivering early results,” the minister said.

NPL toolbox “urgent”

Georgiades acknowledged that the 4.25% yield on the bond was high, although he also noted it was the lowest in Cyprus’ history.

Referring to the high level of non-performing loans and alluding to the legislation that remains pending in parliament, he said that NPLs pose a serious problem.

“What is urgently need is a completion of the toolbox that will enable lenders and borrowers to find workable solutions.”

“What we must guard against is an irresponsible populist pressure that creates the perceptions that loans can somehow vanish without someone paying the bill. Let me say clearly that someone always does,” he added.

Source: InCyprus

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