Finance minister Harris Georgiades said that the two communities have still to agree on several important issues which will ensure with “credible” arrangements from day one that the entire united Cypriot economy will benefit from the lifting of the division.
“Major issues remain open and it is imperative that they are tackled, discussed, agreed and implemented if we are to ensure that the otherwise positive prospects for the economy will be confirmed,” Georgriades said in an interview less than four weeks before President Nicos Anastasiades and Turkish Cypriot leader Mustafa Akinci meet in Geneva to discuss final remaining questions of the Cyprus problem, including the property and territorial aspect, guarantees and security.
The positive prospects for the Cypriot economy, which include enhanced economic activity, inflow of investment, establishment of political and economic relations with Turkey, and local and regional economic exchange, “cannot and will not happen automatically,” Georgiades said. “Very credible economic arrangements have to be in place from day one. We still have open issues”.
The finance minister said that the implementation of budget discipline and the effective adoption of the euro island-wide from day one, are two of the questions remaining open even after Anastasiades and Akinci already reached agreement “in principle”.
The two leaders failed in a previous attempt more than a month ago to agree on the criteria for the territory that each of the two federal states in a future bizonal, bicommunal federation will control.
“It’s one thing to agree that there will be an internal fiscal pact essentially prescribing sound public finances at all levels of government,” Georgiades continued. “For this to be effected in practice we need to see a very significant effort in the direction of fiscal adjustment in the direction of actually meeting the parameters of this internal fiscal pact, which is necessary not only in order to comply with European economic governance rules but primarily to ensure the viability of the unified economy. We still have a way to go”.
“Our own recent experience shows that an economy cannot function effectively and cannot grow without a healthy banking sector,” Georgiades continued.
Georgiades added that in the absence of a comprehensive financial assessment of the Turkish Cypriot banking sector, it will not be “effectively in position to adopt the common currency”.
This assessment “should have happened and should happen urgently even as we speak,” he said, adding that he does not expect “significant capital requirements” for the Turkish Cypriot lenders given their “very small size”.
The Cyprus Business Mail understands, that while international and European financial institutions agreed to oversee stress tests of the Turkish Cypriot banking sector, Turkish Cypriot authorities continue to deny access bank data. It is also understood that Turkish Cypriot banks do not apply the international accounting standards applied in the European Union, which makes an assessment of available information more difficult.
Turkish Cypriot banks will “probably” require steps towards consolidation, including mergers and improvements of corporate governance, rules and regulations, introducing transparency and implementing anti-money laundering procedures, he said.
While this is “a significant amount of work that is necessary” it will not pose “insurmountable difficulties,” Georgiades said.
“There is no good reason to object,” he added. “What we are requesting is an adequate preparation to the benefit of Turkish Cypriots, Greek Cypriots, the united economy and the excellent prospects which will come about for all of us”.