Cyprus’ economy and banking sector are in a strong position, but decisive fiscal measures for the medium term are needed, IMF representative Age Bakker has said.
The IMF official, accompanied by Governor of the Central Bank of Cyprus Athanasios Orphanides, was received Friday at the Presidential Palace by President of the Republic of Cyprus Demetris Christofias, with whom he discussed the economic and fiscal situation in Cyprus.
“Cyprus is in a strong position, the banking sector is in a strong position, but what is needed is decisive fiscal measures for the medium term”, Bakker said.
In statements to the press after the meeting, the IMF official noted that “fiscal consolidation will be needed in the coming years and the President completely agreed on that”.
He added that a comprehensive package of measures on the expenditure side and also on the revenue side will be needed to get the fiscal position in order in the coming years.
Describing Cyprus as “a very important financial center”, he said that “it has the strength to stay that way”, noting that markets want financial centers to have a solid fiscal position.
The Cypriot President, he said, “expects shortly, at least before the end of the year, to have a comprehensive package in parliament and I am quite sure that Cyprus will be successful in reducing fiscal deficit”.
Invited to assess the economic situation in Cyprus compared to the rest of Europe, he said that Cyprus has been lucky that the crisis hit less hard than in other counties but noted that “at the same time Cyprus is not isolated”.
“This year there will be a little bit growth, next year also a little bit growth, but it is clear that there will not be the large growth figures Cyprus had in the past”, he went on to say.
The IMF official expressed the view that the social security system in Cyprus and the pension system “need to be modernized”, adding that “that needs not to be done overnight but it is needed at the moment that there are clear steps for the future that things will change there”.
Referring to Greece, he said that the country is on the right track.
Greece needed to take very difficult measures but they were necessary, he said adding that at the same time the IMF “is an institution with a human face so the poor and the underprivileged in Greece were protected in all these measures”.
Regarding the situation in Ireland, Bakker said that “we now will come to the rescue of Ireland, it is a difficult but also a different situation because it is more a question of the banking sector and I am sure that the measures the Irish government has taken will be on the right track”.
Asked about the situation in Portugal, he refrained from commenting saying that “we have all these countries in a different position. The important thing is that we make clear to the financial markets that the needed measures are taken, they are mostly on the fiscal side and countries like Portugal and Spain have taken very decisive measures”.
