Cyprus Mail

Georgiades lays out ‘lessons from the crisis’ in New Year message

Finance Minister Harris Georgiades
Finance Minister Harris Georgiades

Finance Minister Harris Georgiades said in an article on Sunday that as Cyprus would in three months or so be exiting its bailout programme, it was time for a sober and frank assessment in order “to never again find ourselves in the same hopeless situation.”

In the article published in Politis, Georgiades said the first lesson of the crisis was the consequences of procrastinating in taking decisions either because of “ideological rigidities” or due to timidity both of which bring “incalculable costs to the economy and citizens”.

“The refusal to reform, and the passive monitoring of deteriorating economic indicators have cost our economy billions. These billions are being repaid by the taxpayer and have deprived society in its entirety,” he said.

The second lesson, he said was that “easy and rapid enrichment is not a healthy model for development”.

“The thoughtless development and lack of respect for the environment are an example to avoid. On the other hand, the sustainable revitalisation of the property sector, sustainable tourism development, the utilisation of prospects for renewable energy sources, a qualitative shift in the services sector, especially investment in knowledge and expertise, can be the basis for a new, healthier growth model,” he added.

The third lesson, Georgiades said was that financial institutions are obliged to responsibly manage the money that depositors entrust to them.

“Effective supervision and proper corporate governance are necessary and obvious requirements.” he said. “In Cyprus neither were applied. The rapid expansion of the banking sector and the thoughtless borrowing became a time bomb under the foundations of the economy.” He said borrowers also had responsibilities. “Any perception that obligations can be waived and that some other party will repay our loans will lead us to new adventures,” the minister added.

The fourth lesson, he said was reining in any continuous expansion of public expenditure. “The recruitment and reckless increases in public and social benefits were irresponsible practices. The reform and structural changes in the public service and government organisations, including privatisation, are being imposed to ensure the sustainability of public finances,” he said.

A fifth lesson was that taxes during a recession would drive the economy into an even deeper quagmire, he said, calling them the “worst form of austerity” by a state which itself has failed to avoid difficult but necessary consolidation of its finances.

“This government succeeded in balancing the budget without new taxes but with the reduction and containment of public spending. And we have gradually begun to see the first tax cuts, which have been made possible precisely because of the consolidation that has been achieved. That should be the way forward for the future,” Georgiades said.

More importantly, he said, though the troika came at Cyprus’ invitation “to lend us money and help us to reform our economy because on our own we failed to do this”, the troika, he added, cannot and must not “be forever be our guardians”. “Our responsibility is to continue reform efforts.”

“Our credibility in the conclusion of an agreement and the strict implementation of what has been agreed is the quickest way back to growth,” Georgiades said. “So we must continue with the same discipline after the memorandum.”

However perhaps the most important lesson of all, the minister said, was that “the path of populism, of dogmatism and slogans leads nowhere”. “Solutions always offer realism, pragmatism and willingness to make difficult but necessary decisions.” This was particularly important in an election year, he added, when citizens decide who will lead them forward for the next five years.

Parliamentary elections are due to be held May.

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