Finance Minister Constantinos Petrides has assured the government will not reinstate the Cyprus Investment Scheme either in the same or similar form to the one terminated following a video released by Al Jazeera network and the ensuing reaction by the European Commission.
“A scheme associated with the previous one cannot be implemented again; the systematic granting of citizenship after a predetermined investment amount without a demand for a connection of the investor with the country in the form of permanent residence,” Petrides told the annual lecture in the University of Cyprus School of Economics and Management.
Acknowledging that the scheme contributed to the reduction of non-performing loans and created thousands of jobs following the 2013 crisis, Petrides however also admitted that “the scheme’s focus on the real estate sector was beginning to create imbalances to the detriment of domestic demand”.
The lecture focused on the effects of the coronavirus pandemic with the minister stating that “the crisis of the Covid-19 pandemic was indeed unprecedented.
“A symmetric crisis of huge proportions which despite the fact it is not attributed to the economy’s vulnerabilities, it nevertheless led to the abrupt and total termination of its activities,” he said, noting that the termination of economic activity was imposed by law and was not a result of market conditions.
He cautioned that “the termination of economic activity to a large extent is still ongoing with various alterations and it is expected to continue at least until a large part of the population is vaccinated,” noting “the progress of this crisis is determined by health parameters and not by economic data which leads to increased uncertainty.
“In this context economic management must be shaped with flexibility and adaptability,” Petrides stressed, adding “the pandemic is not over and the situation in the economy is difficult.
“Cyprus will not emerge unscathed from this crisis,” he said.
The finance minister said Cyprus is exploiting European funds to the best possible degree, stating the EU is not a fiscal Union and as such there are not fiscal transfers or “free money.”
“European funds must be repaid either through contributions (to the Resilience and Recovery Fund) or loan repayments (such as SURE),” he said, recalling that absorption of funds by the Recovery Fund will depend on voting and implementing structural reforms.
On the government support measures which amount to €1.3 billion, Petrides said the government will continue to update them according to the changes in the country’s epidemiological picture.
But he stressed “the lack of such measures would have led to a much more deep and protracted recession from the one we are witnessing today, with a recession close to 10 per cent with huge consequences in the labour market with long term structural problems to the economy.”