Τhe contraction of the GDP of Cyprus is expected to be 2% less than assumed, said Finance Minister Harris Georgiades on Tuesday evening in an event organised in London by CIPA.
“It was predicted to be around 9%; I think it will about 7%,” said Georgiades addressing journalists, bankers, businessmen and academics. He added that the Cypriot government is not complacent and that it is quite conservative in its assessments.
Georgiades, who earlier in the day had given interviews to the Financial Times, the Wall Street Journal and the Economist, remarked that the Cypriot economy is currently going through a “correction phase”, which will take time and effort. “There is no quick fix,” he stressed.
“We are a pro-business, pro-reform government with a clear plan agreed with our troika partners which we implement,” said the minister.
Referring to the domestic banking system he noted that there was a need to restructure and rebalance it. He added that a smaller and better regulated banking sector should benefit the whole economy.
Georgiades commented that all the elements that made Cyprus “a good place to do business” remain despite the recent developments. He said that his key message is that the government knows the economy’s problems, that the dust has settled so it is now clear what needs to be done and that Nicosia works closely with the troika of international creditors to fix the problems.
Asked about the prospect of lifting all capital controls, Georgiades replied that already controls have been relaxed significantly. He said that by the end of the year all domestic banking restrictions should be possible to be lifted, as well as restrictions on international commercial transactions. He explained that at that time Cyprus would have to re-evaluate controls on transferring funds abroad.
Commenting on the danger of capital flight once the controls are completely lifted, the minister noted that “risks remain and that is why the government takes a cautious and gradual approach on the relaxation.” He commented that the real problem relating to the banking system is the lack of credit.
Asked to comment on the economic benefits of a possible reunification of Cyprus, he stressed they would be “enormous”. But he added that in order for Turkey to prove it is honest and willing to solve the 39-year old problem that keeps the island divided “actions must match words”. As he remarked, “if the Turkish Foreign Minister says the Cyprus issue can be solved by March, I say we can even do it by Christmas.” He added that despite the financial difficulties, solving the Cyprus issues remains the government’s first priority.
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