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Cyprus President Demetris Christofias assured today that his government will not impose any new taxes, after announcing a new package totaling nearly 300 million euro, the second set of measures the government has introduced in a bid to boost the economy amid the global financial crisis.
Last November the government announced a 52-million euro package to stimulate growth in the tourist and construction sectors.
Replying to questions, during a press conference to announce the new package, on how the Finance Ministry will deal with the loss of state income as a result of the new measures, Christofias said there will be no tax rises, as a result of relaxation of the EU Maastricht criteria and of the Euroarea in the wake of the financial crisis and particularly because member states are allowed to exceed the ceiling imposed by the Euroarea regarding the fiscal deficit and public debt.
Recalling that Cyprus is likely to present a fiscal deficit in 2009 as a result of a slowdown in the economy as well as a rise in the public debt, the President said ''there are Euroarea member-states presenting (public debt of) 67% while the ceiling lies at 60%.''
''Consequently I believe that we have the reserves that enable us to take additional measures. If there is a need and when the economy developes and takes its usual pace and with our macroeconomic policy we will reduce them again (fiscal deficit and public debt) easier than other countries. So there will be no new taxes,'' he added.
Replying to a question on the liquidity in the commercial banks after the government deposit of 700 million euro in a bid to boost liquidity and reduce borrowing rates, Christofias expressed the belief that Cypriot commercial banks had the reserves and the capability to reduce lending rates and increase lending even without the government deposit.
Noting that there is a decline in lending rates globally, the President noted that ''the Cypriot banks are delaying.''
Last December the Finance Ministry clinched a loan worth 1.4 billion euro with the Cypriot commercial banks in a bid to refinance public loans expiring in 2009 and at the same time inject liquidity in the Cypriot banking system. The government after refinancing some its public loans will keep 700 million euro as a deposit to the Cypriot banks for an additional 3.5 months.
''This deposit of 700 million euro constitutes an encouragement for the banks as well as a call to reduce lending rates as soon as possible,'' the President said.
Furthermore, Christofias did not rule out a possible issuing of government bonds in a bid to inject more liquidity into the banking system.
''No proposal is abandoned. We will see the outcome of these measures and we will act accordingly,'' he said.
Asked if the government will announce social measures, Christofias said ''don't be hasty. Of course there will be a package or packages.''
Asked if the government will monitor VAT cuts to ensure lower hotel prices in the tourist sector, Finance Minister Charilaos Stavrakis warned that should hoteliers or tourist agents not reduce their prices to improve competitiveness of the Cypriot tourist product, the government will take measures.
