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EU finance ministers call for prudent fiscal policy

Irish Finance Minister Paschal Donohoe and his Cyprus counterpart Harris Georgiades attend an European Union finance ministers meeting in Brussels

The EU’s finance ministers on Tuesday adopted recommendations calling on Cyprus to continue its prudent fiscal policy and complete public sector reform.

The Ecofin council upheld five categories of macroeconomic recommendations for Cyprus, without discussion, following the publication by the Commission of the country-specific recommendations on macroeconomic and fiscal policy on February 22.

The recommendations were already known from June 15, following the Eurogroup – Ecofin meeting in Luxembourg.

According to the recommendations, Cyprus must continue its prudent fiscal policy, achieve the 2018 fiscal targets, complete the reform in the public sector, speed up the administration of justice, reduce the volume of non-performing loans, create a secondary market for the same loans, advance education reforms, complete the separation of the Electricity Authority of Cyprus, and conclude the plan for universal access to public health.

More specifically the council calls on Cyprus to deliver on five chapters:

– Pursue its fiscal policy in line with the requirements of the preventive arm of the Stability and Growth Pact, which entails remaining at its medium term budgetary objective in 2018. Use windfall gains to accelerate the reduction of the general government debt ratio. By the end of 2017, adopt key legislative reforms aiming to improve efficiency in the public sector, in particular on the functioning of public administration, governance of state-owned entities and local governments.

– Increase the efficiency of the judicial system by modernising civil procedures, implementing appropriate information systems and increasing the specialisation of courts. Take additional measures to eliminate impediments to the full implementation of the insolvency and foreclosure frameworks, and to ensure reliable and swift systems for the issuance of title deeds and the transfer of immovable property rights.

– Accelerate the reduction of non-performing loans by setting related quantitative and time-bound targets for banks and ensuring accurate valuation of collateral for provisioning purposes. Create the conditions for a functional secondary market for non-performing loans. Integrate and strengthen the supervision of insurance companies and pension funds.

– Accelerate the implementation of the action plan for growth, focusing in particular on fast-tracking strategic investments and improving access to finance, and, by the end of 2017, resume the implementation of the privatisation plan. Take decisive steps towards the ownership unbundling of the Electricity Authority of Cyprus and, in particular, proceed with the functional and accounting unbundling by the end of 2017.

– Speed up reforms aimed at increasing the capacity of public employment services and improving the quality of active labour market policies delivery. Complete the reform of the education system to improve its labour market relevance and performance, including teachers` evaluation. By the end of 2017, adopt legislation for a hospital reform and universal healthcare coverage.

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