Cyprus received confirmation at the Eurogroup meeting of finance ministers on Monday that it would officially exit the bailout programme on March 31 and wrote to the IMF on the same day cancelling the last part of the programme, which was officially due to expire on May 14.

While noting that there “is still one prior action outstanding”, Eurogroup President Jeroen Djisselbloem added “overall the Cypriot authorities have delivered a very, very good job”.

Indicating that Cyprus is considering tapping the international financial markets again, finance minister Harris Georgiades told Bloomberg TV that the country can go “a very long way” without the need to tap the markets but added, “this does not say we shall not be out and about in the markets”.

Three years after the crisis, Cyprus’ best credit rating, at BB- from Standard & Poor’s (S&P), is still three notches below investment grade. The government is hoping to see further upgrades in the next rating reviews due by Moody’s Investors Service and S&P on April 18 and by Fitch Ratings on April 22.

Union demands

One thing potentially standing in the way, however, is incomplete reforms. Despite achieving a balanced budget, a number of difficult structural reforms, such as the national health scheme, public administration reforms and changes to the operation of semi-government organisations, are still on the shelf.

The government will be required to handle some really ‘hot potatoes’ from now until April 14, when this parliament dissolves, and after May 22 when the new one is voted in.

Cyprus Telecommunications Authority (Cyta) employees are on the alert, with the organisation’s privatisation bills still pending before the House. Also pending are the six bills which concern public administration reforms and state salaries, to which unions are strongly objecting.

At the same time, demands from unions are growing day by day. With the Eurogroup still in session on Cyprus’ bailout exit on Monday, state nurses were deciding to strike for an indefinite period.  Nurses want their pay-scales upgraded to reflect the fact that they are now typically university graduates.

Other major unions have also been demanding that the time has come for pay cuts, salary raises and benefits freezes to be restored. The government has already promised pay rises in 2017, provided the House adopts the state salary bill. Provident fund representatives are also trying to claim further compensation of around €300 million for the haircuts imposed on deposits in 2013.

All these decisions are likely to be delayed until after the elections, which could put off the day that Cyprus returns to investment and can enjoy lower borrowing costs.

Source: InCyprus