articles | 31 March 2016

ESM Chief hails Cyprus' success

Head of the European Stability Mechanism (ESM) Klaus Regling has called the end of the Cyprus adjustment programme a great success.

In an official announcement by the ESM he said that there are still challenges that need to be faced, such as non-performing loans (NPLs), and noted that there would be an ongoing monitoring regime according to the ESM agreement and the provisions of the early warning system.

Regling called the end of the programme “a great success, especially if one considers the situation was in Cyprus three years ago, when the programme started. Anything that has been achieved has been due to the citizens of Cyprus.”

He said that the budget deficit has been almost eliminated, the Cyprus banking sector has been restructured, and the competitiveness of the economy has been restored.

“It took in fact only 70% of our programme, €2.5 billion less than originally pledged. Global investors were willing to buy Cypriot bonds once more last year. So, with completion of the Cyprus adjustment programme we now have four success stories in the Eurozone after Ireland, Portugal and Spain came out of their programmes earlier.”

While explaining the next steps for total adjustment, Regling said that “the ESM programme is over, but certain challenges remain. On the one hand, the financial consolidation must not be put in danger while at the same time the reforms must continue.”

The biggest problem in Cyprus today, he said, are the NPLs in the banking sector, which are higher than elsewhere in Europe.

“I think it is reassuring that the President of Cyprus and the Minister of Finance emphasised their desire to continue the reforms and to focus on the remaining challenges”, he added.

On the future of the ESM in Cyprus, he said: “the ESM is the largest creditor of Cyprus, and as such it is natural that we will be examining closely economic and financial developments in the country.”

“The ESM agreement in reality imposes us to do what we call ‘early warning’ in order to be certain that the country will be able to pay back the ESM. So, along with the European Commission and the International Monetary Fund, who also have their own supervision procedures, we will have in the next years a constant evaluation of the performance of the economy.”

Source: InCyprus

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