EU Ministers of Finance agreed on Tuesday on the guidelines for the European Commission's plan for the recovery of the European economy. The plan worth 200 billion euros translates into 1.5% of the GDP of each member state.
Cypriot Minister of Finance Charilaos Stavrakis, who participated in Tuesday's ECOFIN and Monday's Eurozone meeting, said that the Ministers discussed questions whether the programme and the proposed sum was obligatory and how it would be implemented.
Stavrakis said the view that prevailed was that the proposed sum of 200 billion euros was an aim and a wish, without any legal or other commitment of the states to follow.
However, it appears that all believe that Europe's finances are not in good shape, given that in the fourth quarter of 2008 and the first quarter of 2009 there will be a recession in the Eurozone, Stavrakis said, adding that the only encouraging development is that inflation is dropping due to oil prices, which gives banks the ability to reduce interest rates.
Stavrakis noted that many countries would be adopting their own large ''packages'' of measures and that there was an expectation that ''we may reach the aim of 200 billion euros.''
The Eurozone Ministers dismissed one of the proposals in the Commission's plan, which provided for the reduction of the regular VAT factor in order to boost consumption. The Eurozone countries believe that this measure would not perform in the long run.
Referring to Cyprus, Stavrakis said that the economy was on a good course compared to the rest of the Eurozone, the growth rate would reach 3.7% for 2008, there are conditions of full employment, and inflation will drop below 5% by the end of the year, compared to 5.5% in the summer.
''We will be affected by the crisis but to a lesser extent than the other partners,'' he said, adding that this year a 1% public deficit is expected for Cyprus, while the debt will drop from 60% of the GDP in 2007 to 49% of the GDP in 2008.
''This has increased our credibility and we are at a very good starting point,'' Stavrakis pointed out.
He added that theoretically the Commission's proposal for making available 1.5% of the GDP of each member state meant 250 million euros for Cyprus.
''At a recent meeting at the Presidential Palace, an action plan worth 52 million euros was approved. Additionally, a coordinating group has been set up, comprising permanent secretaries of Ministries, for the implementation of the government's development planning, worth 1.1 billion euros. Traditionally, the development planning has a 60% to 70% rate of implementation, so an increase by 10 units creates additional expenditure of 110 million euros for the economy. This makes us believe that we are in a very good position and furthermore we remain within the spirit of this direction of the EU for the revitalisation of the economies,'' he said.
Referring to the small and medium sized enterprises, Stavrakis said there is a general problem of loans from banks in all member states due to a lack of liquidity.
''The commitment of the European Investment Bank for the significant increase of loans over the next few years will greatly help SMEs find the liquidity, given that they will receive a large part of this raise. This development satisfies us and we must find a way to bring banks and businesspeople in contact with the European Investment Bank, in order to get our share,'' he concluded.
