In an interview with CNBC in Washington DC, Georgiades said however that they have not yet discussed with the ECB the details of such a programme.
“But we stand ready to discuss specifically and primarily our banks, how best they can make use of this new instrument bearing in mind that credit lines in Cyprus have been severely disrupted recently,” he said.
“We are eager to see the re-establishment of credit. We need liquidity in our economy to give an extra boost to the recovery, which is already happening. We are seeing a correction of the Cypriot economy, but now is the time to give that extra push.”
Georgiades suggested that criticism from Germany, to the effect that buying up Cypriot and Greek paper was going to turn the ECB into a ‘junk bank’, was unfair.
He said that fiscally the Cypriot economy is performing better than anticipated.
“We are doing away with the primary deficit. As of this year we shall be out of the excessive deficit (procedure) two years ahead of time, when other EU member states are still struggling, and that’s Cyprus which was led into severe financial and economic difficulty,” he noted.
“So we are doing everything else that is necessary, the difficult but necessary structural reforms, which is something that Germany quite rightly so insists on. But after doing this structural reform and fiscal adjustment there should be this extra push to get the real economy reactivated.”
The ECB is considering whether to enact rules that would allow asset-backed securities issued by Greek and Cypriot banks that carry a junk rating to be purchased by the ECB under its new purchase plan, as part of a package of measures aimed at boosting growth and inflation in the eurozone.
Greece and Cyprus government debt securities have a junk rating by major ratings agencies.Both countries were bailed out by European governments and the International Monetary Fund to avoid bankruptcy.
Ratings agencies cap the ratings of bundled bank loans, a form of asset-backed securities, so that they can only be a certain number of notches above the rating of the sovereign itself. As a result, if the ECB’s ratings rules on collateral were applied to ABS purchases, Greek and Cypriot ABS would have to be excluded.
Source: Cyprus Mail
