Cyprus Mail

Cyprus shaking off recession say lenders, growth estimates revised upwards, minister says (Update 2)

Finance Minister Harris Georgiades: solution will boost investments

Bailed-out Cyprus has made “overall good progress” on its economic adjustment programme but needs to keep on with its reforms, senior European Commission sources said on Friday.

Teams from the European Commission, the European Central Bank and the International Monetary Fund on Friday concluded a staff-level agreement signing off on progress made by Cyprus.

“As things stand now I don’t see that being the case (of requiring the amount). Thanks to the good fiscal performance of Cyprus, which was somewhat better than expected, certain savings can be done,” one source said.

“We can confirm we still see Cyprus emerging out of recession, growth is timidly up,” the source added.

Earlier in the day, Finance Minister Harris Georgiades said the economy’s growth estimates had been revised upwards.

Following a meeting with the heads of the troika of international lenders, Georgiades said GDP growth for 2015 has been revised upwards to 0.5 per cent, compared with a 0.5 contraction predicted last spring.

“This disproves the impression that implementation of the programme leads to deeper recession,” Georgiades said.

He went a step further saying finance ministry technocrats would even exceed the revised 0.5 per cent, since this is what the improved data showed.

Cyprus however must complete certain prior actions before the next tranche – €500 million – can be released.

Parliament must approve the title deeds bill, scheduled for discussion before plenum on September 3, and the legislation on the sale of loans.

At the same time, bills on civil service reform and privatisation of state telecoms company CyTA must be submitted to the cabinet by the end of August.

It is understood that the sale or transfer of loans was not among the prior actions – pushed to the end of September. A bill on loan securitisation has been pushed to the end of the year.

The next Eurogroup meeting is scheduled for September 11.

The minister said there was no need for additional measures, but was quick to add that there was no room to relax.

“Prudent fiscal policy will continue and I think the combination of fiscal consolidation we have achieved with the return to positive growth rates, with the gradual correction of the economy, is perhaps the most significant success of the Cypriot programme,” Georgiades said.

Emphasis would now be put on pushing through important structural changes needed by the country like privatisations and public service reform

Georgiades said public service reform was an ambitious and important reform that regulates payroll and future pay increases “in a reasonable manner consistent with the economy’s true performance and not be a danger and a burden to the private economy.”

Of CyTA, he said it was an organisation of great value for the country and the economy, operating in a particularly competitive sector with rapid technological progress.

It must be freed of everything that keeps it bound to structures and procedures of the past and this can be achieved by attracting a strategic investor through credible and transparent procedures.

There was also the matter of health reforms, including making public facilities autonomous.

“The objective remains fixed that these laws must approved by the end of the year,” the minister said.

He added that a lot of work has been done by former minister Philippos Patsalis, expressing certainty that the new minister, appointed on Friday, would intensify efforts in a bid to complete this reform, which is necessary for the establishment of the national health scheme.


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