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Minister upbeat over recovering economy

Finance Minister Harris Georgiades

By Angelos Anastasiou

Cyprus is completing its reform programme agreed with the European Stability Mechanism and the International Monetary Fund in March having utilised less than €8 billion out of the €10 billion available to it in bailout money, without requesting a new programme, and without needing to employ a conditional credit line, Finance Minister Harris Georgiades told the European Parliament’s Economic and Monetary Affairs committee on Monday.

Addressing the committee, Georgiades gave a brief overview of the history of the crisis that threatened to bring down the island’s economy in early 2013, saying that “irrational exuberance” gave rise to unsustainable credit expansion, resulting in increasing private debt and a property bubble. Coupled with unchecked public spending, Georgiades added, these formed a combination of fiscal and banking deficiencies that created the “perfect storm” in March 2013.

“Our cash reserves in early 2013 lasted us for one month,” Georgiades said.

“The state’s coffers were literally empty.”

Three years on, the situation is much improved, the finance minister noted, owing to the sacrifices made by Cypriots, the resilience of key productive sectors of the economy, and the decisive reform programme deployed by the government.

“I don’t want to present a rosy picture, but I am presenting a story of economic recovery,” Georgiades said.

“We can take it from here.”

Taking questions from MEPs, the minister said Cypriot banks are no longer susceptible to regional economic tremors, because “as a response to the crisis, our banks’ links to the region were severed”.

But despite renewed confidence in the banking sector, he noted, the government eyes a much more ambitious reform programme, including public administration reform and privatisations.

Asked to what extent the government of Cyprus assumes natural gas finds could be a potential economic windfall in the medium-term, Georgiades said “zero”.

“That was our policy of choice,” he said.

“Obviously, the revenue stream, when it comes, in four or five years, will be very welcome. But we chose to assume zero revenues, in order to achieve whatever else is necessary in order to consolidate our finances and manage our debt. I think it was a wise choice.”

Responding to criticism that Cyprus is a tax haven, boasting “one of the lowest corporate tax rates and one [registered] company per four inhabitants”, Georgiades said the country is a services-based economy, and “cannot be accused of that”.

“Cyprus is not a tax haven,” he said.

“Our tax regime is attractive, it is competitive, but it’s perfectly legitimate, and one which exists in other member states, too. We have been under the tight scrutiny of the IMF and the Troika for the past three years, and our legislation is stricter than that of other EU member states. Obviously, Cyprus is a service-based economy, offering international business services, and we’re not alone in doing that. But we are fully compliant with all the rules and legislations of the European Union.”

In response to another question, Georgiades said privatisations are on the government’s to-do list.

“This is not a long list – it includes the ports and a licence to operate a casino,” he said.

“But we do want to partially privatise telecoms company CyTA, and we will as soon as we get the green light from parliament.”

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