Brussels, 05/04/2013 (Agence Europe) - “We are in for a rough ride, but the Cypriot economy has excellent prospects,” said the new Cypriot finance minister, Harris Georgiades, on Thursday evening in an interview with CNN.
He said that corporation tax in Cyprus is still low and the country is a wonderful tourist destination. Georgiades said: “I hope for a healthier banking sector, we have low taxation. It is up to us to make it even better and restore confidence through decisive implementation of the measures agreed. With implementation of the right measures and investment, Cyprus could see an economic turnaround in 2014,” said the former labour minister.
On CyBC on Thursday evening, Cypriot government spokesperson Christos Stylianides said the recession would be worse than forecast in 2013, being more like 13% than the forecast 8.7%. Hundreds of bank workers, concerned about their jobs and pensions, demonstrated outside the Cypriot parliament in Nicosia on Thursday, some with banners calling for Cyprus to leave the euro. “That is not an option for Cyprus, we will do whatever it takes to do our house in order,” said Georgiades. Stylianides said: “We can create the conditions to have growth more quickly than the troika expects,” and if the reforms were implemented with determination, it would be possible turn the situation around in 2014. (The troika of lenders is the European Commission, the European Central Bank and the IMF). In its Winter Economic Forecasts published before details of the aid plan were known, the European Commission says the recession will extend into 2014.
Eurozone examine the MoU. The Council of the EU's euro working group examined in Brussels on Thursday and Friday the deal agreed earlier in the week by the troika and the Cypriot government. Cyprus will be discussed at an informal Eurogroup meeting in Dublin on Friday 12 April and the national parliaments that have to endorse the aid package are expected to do so by the end of April. The first cash from the European Stability Mechanism (ESM) is expected in early May.
Commenting on the Memorandum of Understanding, a Cypriot government spokesperson said on Wednesday that the Cypriot president, Nicos Anastasiades, wanted a clause in it to release the country from the ESM yoke as soon as it has paid back its loans. The Commission refused to comment.
Huge acquisition of Greek bonds a mistake. An investigation by global professional services firm Alvarez and Marsal is reported by Cyprus Mail to have shown that there was no justification or clear reason for the decision by Bank of Cyprus (BoC), which has been saved from dissolution by the aid plan, to buy €2.4 billion of Greek bonds. BoC lost €1.9 billion in the €4.5 billion write-down of Greek debt last year. The investigation says that the bond purchase strategy was aimed at getting the highest interest rates. The Central Bank of Cyprus, which commissioned the investigation a few months ago, will also be examining the purchase of Greek bonds by Cyprus' second-biggest bank, Laiki, which is now being dissolved.
The losses to savers and shareholders under the Cypriot bailout have forced the country to introduce tight restrictions on capital movement. “Soon these temporary measures will be behind us,” promised Georgiades, without giving any dates. He pointed out that the measures have already been relaxed in four laws issued on Thursday.
Silence from Moscow. A Cypriot source says that Russia has not yet given any indication to Cyprus of an easing of the repayment conditions for the €2.5 billion loan granted by Russia in 2011. Nicosia is hoping for a reduction in the interest rate and longer repayment deadlines. (EL/transl.fl)