The withdrawal of the bill earlier this week that would have provided support for Cyprus businesses which have suffered in the coronavirus crisis boded ill for the health of the economic community on the island.
But the Cyprus Mail has learned that the government is in discussions with the European Investment Bank (EIB) and with the European Bank for Reconstruction and Development (EBRD) to find solutions that will rapidly provide such support. Sources close to the government said that such support has been accessed previously by the government without any need to engage in parliamentary debate, or any involvement of the Auditor-General.
The most significant component of such support is expected to come from the EIB’s €540 billion package of three safety nets for workers, businesses and member states. The package consists of a €100 billion fund to help companies avoid laying off workers – this is the so-called SURE mechanism.
Then there is the €200 billion Pan-European guarantee fund for loans to companies, aimed specifically at SMEs and also managed by the EIB. This is a dedicated guarantee scheme to banks combined with dedicated liquidity lines to banks to ensure additional working capital support.
There is also €240 billion allocated to coronavirus crisis support for member states (European Stability Mechanism).
The government is likely to tap either the guarantee fund or the SURE mechanism – it is not clear whether the funds managed by the European Stability Mechanism would also be accessible.
“The great advantage of these sources of funds is that the government can use it to provide banks with funds for loans to businesses. The government does not require parliamentary approval for the scheme, so there is no danger of it getting tied up in political wrangling, which is what happened to the proposal in the bill,” commented former finance minister Harris Georgiades.
And then there is the SURE mechanism. But how does SURE work?
As European Commission President Ursula van der Leyen explained: “SURE is Europe-supported short-time work. It can mitigate the effects of the recession, it keeps people in work, it enables companies to return to the market with renewed vigour. The Commission will provide loans to those Member States that need them, to strengthen their short-time work schemes. These schemes now exist and are planned straight across the European Union. So SURE can benefit all Member States who want to use it. We can mobilise €100 billion to do this.”
Separately, the EBRD has confirmed that the current programmes underway which support trade through the banks will continue and could potentially be expanded.
“We have established Trade Facilitation Programme facilities with five banks (including one in northern Cyprus) with limits totalling €105m. Since inception, the TFP supported 640 import-export transactions for the total amount of €320m.
The average transaction size of less than €500,000 demonstrates that the TFP has supported mostly imports of SMEs. A higher volume of TFP is expected by year-end to accommodate the growing demand in the wake of COVID-19,” a spokesperson for the EBRD told the Cyprus Mail.