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Finance Minister predicts milder GDP contraction

Finance Minister Harris Georgiades

Τhe contraction of the Cyprus economy is expected to be 2% less than what was initially forecasted, said Finance Minister Harris Georgiades from London on Tuesday evening, in an event organised by CIPA.

“It was predicted to be around 9%; I think it will about 7%,” said Georgiades addressing journalists, bankers, businessmen and academics. He added that the Cypriot government is not complacent and that it is quite conservative in its calculations.

Georgiades, who had given interviews to the Financial Times, the Wall Street Journal and The Economist earlier in the day, remarked that the Cypriot economy is currently going through a “correction phase”, which will take time and effort. “There is no quick fix,” he stressed.

“We are a pro-business, pro-reform government with a clear plan agreed with our partners (troika) which we are implementing,” said the minister.

Referring to the domestic banking system he noted that there was a need to restructure and rebalance it. He added that a smaller and better regulated banking sector should benefit the whole economy.

Georgiades commented that all the elements that made Cyprus “a good place to do business” remain despite the recent developments. He said that the government knows the economy’s problems, and now that the dust has settled it is clear what needs to be done and that Nicosia is working closely with troika in that direction.

Asked about the prospect of lifting all capital controls, Georgiades replied that some controls have already  been relaxed significantly. He said that by the end of the year all domestic banking restrictions should be lifted, as well as restrictions on international commercial transactions. He explained that Cyprus would also have to re-evaluate controls on transferring funds abroad.

Commenting on the danger of capital flight once the controls are completely lifted, the minister noted that “risks remain and that is why the government takes a cautious approach on the relaxation.” He commented that the real problem relating to the banking system is the lack of credit.

Asked to comment on the economic benefits of a possible reunification of Cyprus, he stressed they would be “enormous”. But he added that in order for Turkey to prove it is honest and willing to solve the 39-year old problem that keeps the island divided “actions must match words”. As he remarked, “if the Turkish Foreign Minister says the Cyprus issue can be solved by March, I say we can even do it by Christmas.”

He added that despite the financial difficulties, solving the Cyprus issues remains the government’s first priority. (CNA)

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