“The county can stay in the euro area with this and continue reform and so prevent the worst which already started to unfold,” Georgiades said in an interview on state-radio CyBC today. The decision “creates a perspective,” he added.

On June 30, Greece’s economic and financial reform programme expired and the country failed to pay back to the International Monetary Fund €1.5bn, part of an earlier loan. The IMF said Greece was in arrears and would be receiving financing “once the arrears are cleared”. A last minute attempt to broker a cash-for-reform agreement yesterday at a tele-conference of the euro area finance ministers failed to produce an agreement. The eurogroup’s president and Dutch finance minister Jeroen Dijsselbloem said that Greece has to change its stance before a new programme can be agreed.

On Sunday, Greece imposed capital controls and said it would keep its banks shut until July 6, in an attempt to deal with increasing deposit withdrawals after the European Central Bank decided to maintain its liquidity lifeline to Greek banks unchanged.

The government under radical left prime minister Alexis Tsipras, who came to power in January after promising to ditch austerity and renegotiate the country’s bailout terms, announced a referendum on a programme proposed by creditors.

Greek voters are set to decide on July 5 on whether they accept or reject a programme the government already rejected on Friday when it broke off negotiations.

“This step can stabilise the situation and create conditions for the country to recover,” Georgiades said with respect to the Greek government’s new programme request. “We shall support this request without reservation”.

Georgiades said that while the approval of the Greek request would require a “demanding and time consuming” procedure, “the Eurogroup must give its approval immediately”.

The approval of the request by euro area finance ministers will send the message both to Greece and the rest of the world that “not everything is lost,” the Cypriot finance minister said and added that he “strongly” believes the new programme should not be tax-oriented and should instead be oriented towards reform and consolidations, a criticism Georgiades also made on Monday in reference to the latest draft programme tabled by creditors.

The new programme will have to “unleash productive forces within the Greek economy that are inexhaustible”.

Georgiades said “unfortunately Greek people are suffering and experiencing the consequences of decisions or the lack of decisions that led things to this situation”.

The Finance Minister said while that the delay in agreeing the terms of a new programme for Greece may be more onerous, it is still possible to prevent Greece’s public debt of 175% of the country’s economic output, from further growing.

“There is no doubt about it, the situation deteriorated and things would have been better if this programme had been agreed few months ago and not now after the state of the budget and the real economy worsened,” he said. “Indeed, the situation is becoming more difficult. Spending has to be maintained at a level at which it is not further inflating public debt, while, on the other hand, the economy has to return to growth, driven by tourism, shipping and by unleashing productive forces, so that (debt) follows a downward trend as a percentage of gross domestic product”. Georgiades added that tight fiscal policies he described “have to be applied consequently”.

“The only thing that could now could start giving some hope and a feeling that the situation is stabilising is at a political level both in Greece and the rest of the euro area that the right messages are sent, that we have left confrontational and entrenchment approaches behind and that we will work starting from now in working together and by supporting each other in this direction,” he said.

While Georgiades declined to comment on the Greek government’s decision to hold a referendum, he said that “de facto, there will be no deal on the new programme today or tomorrow; negotiations have to precede with the troika” of the European Commission, the ECB and the IMF which supervises bailouts in the euro area.

Creditors have to agree the “terms and parameters of the new memorandum of understanding” before parliaments and national governments of creditor countries give their approval, he said. “Essentially, this cannot happen before Sunday. We can though already today send a positive message on behalf of Greece as well as the partners that will contribute to the highest possible degree towards restoring stability, confidence and perspective”.

Source: Cyprus Mail