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articles | 22 September 2015

Economic reforms work, President Anastasiades tells US audience

President Nicos Anastasiades recently said if there was one lesson other countries learn from Cyprus it would that structural reforms work, even in the short term.

In a speech to the Chicago Council on Global Affairs titled: ‘Lessons from the Cypriot crisis and the road to recovery’, Anastasiades said that while it was  undisputed that the full benefits of structural reforms would be seen in the long run “and as far as Cyprus is concerned well after the term of my government”, they were also important in the short run “especially in times of crisis, for one single reason,” he said, “they act as a catalyst for the restoration the country’s lost credibility; the restoration of confidence”.

“And as you all know, the economy is all about confidence and expectations,”   he added.

Anastasiades said investors, entrepreneurs and consumers, all expected macro-economic stability; a long-term framework where they can operate and create sustainable economic activity without distortions.

“We really had to turn the negative expectations that led the country to the verge of collapse into a vote of confidence,” he said.

And to regain credibility and trust required action and real reforms, commitment and determination, uphill battle that Cyprus had won.

He acknowledged that the loss of credibility and many of the economic problems in Cyprus were caused by years of inactiveness, delays, and procrastination.

“Correcting this situation inevitably involves political cost, and requires courage and determination,” he said. “A second lesson is that the perception that fiscal consolidation always leads to deeper recession and rising unemployment is false. We can bemore productive by ensuring that fiscal consolidation and economic growth go in hand.”

Economic recovery or growth was a structural issue and did not always require continuously increasing public expenditure, he added.

He also said the Cypriot case was a part of the wider EU crisis that exposed the excessive imbalances, rigidities, and uncompetitive economic structures of many euro-countries, including Cyprus.

“But it also revealed the flaws of the euro-system; a mainly political experiment of forming a monetary union without a political union or at least an effective mechanism for fiscal consolidation,” he added. “But I am very much encouraged by the fact that action was taken at EU-level. New institutions are being built and new common rules agreed.”

Anastasiades said Cyprus had paid a big price “not only from our own wrong policies, but also from the weaknesses of the economic governance and supervision of the eurozone and the EU”.

He said however that a Cyprus political settlement would provide all the parameters conducive to economic development, business and investment; regional stability, and open markets “with none of those parameters being obstructed by political barriers”.

“A solution that will end the rapid alteration of the demographic character of our country and will act as a catalyst for the economic development for the decades to come,” he added.

Energy, shipping, tourism, or transport would be among the first to benefit, he said.

“The solution of the Cyprus problem will be the most significant growth reform that we can achieve. Turkey should recognize both the prospect and the reality and facilitate the solution of this long-standing issue.”

Source: Cyprus Mail

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