Finance Minister Harris Georgiades has stressed the importance of quick policy action response in addressing fiscal challenges.
In statements to the press, the minister was explaining the country`s strategy in lifting the capital control imposed after the bail-in was announced in March 2013.
“There was no precedent, no text book approach to follow, when it came to lifting capital controls. Instead we used a common sense approach. A steady but gradual relaxation, in direct contact with the banks. We’ve been in contact with the banks, we knew what was going on the ground. So we made sure every relaxation did not lead to outflows of capital. In the end the controls were lifted and that was an issue where we disagreed with the Troika,” he said.
The capital controls after a certain period acted as a red flag indicating that there is a difficulty in the country, he said. “So we lifted the flag and we made sure that there were no problems any more,” he said.
“That’s what we did, we wanted the IMF on board, the programme being an exercise of recovery and confidence, what better seal of approval there could be than that of the IMF”.
When called to indicate the number one element for a country to avoid in the future he said: “the number one lesson to avoid is delaying action, all problems Cyprus faced were due to delaying taking proper policy action. Take early preventing action, that’s what you need to do”.
Commenting on the policy mix, the minister said that Cyprus did not introduce a single new tax since embarking on the programme in spring 2013. “Instead we identified spending cuts and there were spending items that were not detrimental to growth that we picked first,” he explained.
“It is not as growth versus austerity dilemma might have it, tax stability helped bring the economy out of the recession, all has to do with the way someone achieves fiscal consolidation. That’s the key and that’s my own experience,” he said.
Sometimes, he added: “We must be ready to lose an election to do the right thing”. (CNA)