Credit ratings agencies are not necessarily credible but unfortunately the markets follow their forecasts, Nobel Prize laureate Christopher Pissarides stated today.
Pissarides who was speaking in a Press conference said that in his view, credit ratings agencies ought not to be taken so seriously, adding however that the markets follow their ratings and give them credibility.
If for example, he said, a credit rating agency announces that it will monitor the situation in a certain country stating that it is not certain whether there are negative developments, it works like a self fulfilling prophecy and in the end problems arise in that country because of the reaction following the announcement.
However, Pissarides said the Government should take serious note of the recent credit rating agency warnings about Cyprus, noting that it has been said that one of the reasons behind these warnings is Cyprus’ close economic ties with Greece as far as the banking system is concerned, something which, as he said, we can do nothing about.
Pissarides said that the Minister of Finance Charilaos Stavrakis called him about ten days ago to ask him whether he would be willing to offer his services to Cyprus, adding that he replied positively without hesitation.
He also stressed the fact that he is an academic and not a politician and that he does not wish to get involved in any type of political argument.
“I was given an award for a study of a purely academic nature”, he said speaking of his Nobel Prize.
Replying to a question about the economy of Cyprus, he said that statistical data show a very mild recovery of the Cypriot economy.
“It is still very close to zero, but not negative”, he noted.
“In terms of what are the problems we have to face”, he added, “it is the fiscal issue and not just how to find more money but how to structure the whole budget and taxation in order to increase its ability to cope with any future problems”.
Pissarides who was also invited to suggest ways to deal with unemployment in Cyprus said that the problem is long-term unemployment, suggesting that it would be a good idea to monitor the unemployed.
The reasons behind the inability to re-enter the labour market of people who remain unemployed for a period of longer than six months should be examined as well as ways in which they can be helped, he added.
Asked whether the retirement age in Europe should be extended, he expressed the view that it should, explaining that nowadays people have a higher life expectancy than when the retirement age was initially decided.
Pissarides made special reference to the University of Cyprus which he has just joined, saying that it has matured and has become an independent University which can stand on its own.
He also noted that studies have shown that the more independent a University is the more likely it is to be successful on an international level.
Pissarides is due to give his first public lecture in Cyprus since he was awarded the Nobel Prize, at the University of Cyprus on Thursday.
