Cyprus Minister of Finance Vassos Sharly said on Sunday he is ready for negotiations with Troika mission (representatives of EU Commission, European Central Bank and IMF) to arrive on the island on July 23 as part of Cyprus` application for financial assistance from the EU bailout mechanism.
Speaking to CNA, Sharly appeared optimistic that the Torika mission will not be proposing onerous measures, as it learnt from the negative impact of the measures imposed to other EU member-states under bailout such as Ireland and Portugal.
The Troika mission visited Cyprus early July for a close scrutiny of the banking sector severely hit by Greek sovereign debt haircut and by the over-exposure to the Greek economy, as well as the refinancing requirements of the government.
Noting that the visit will not be a fact-finding one, Sharly said "surely we are ready."
"There is no doubt that we are prepared as they are prepared as well. They know the data and therefore, it will be a serious discussion on what needs to be done," he stressed.
Replying to a question whether the Troika has learnt its lesson from the deterioration of the economies of Greece, Portugal and Ireland due to the heavy austerity measures imposed as part of the fiscal adjustment programme and will not be proposing contractionary measures, Sharly said the mission has obtain huge experience from the first visit to Cyprus "that is, the sensitivities which may arise in an economy and they are taking them well into account."
"Therefore, I expect and I believe that the experiences which Troika will bring will be very helpful because they have seen the effects of their suggestion in other countries and they will take that into account in our case," he said.
Furthermore, Sharly described press reports that the Troika will come to Cyprus as "gladiators and will reduce salaries and will plunge the economy."
He said that those who wish to learn how Troika will act should look to the cases of Ireland and Portugal and to a lesser extent to Spain but not to the example of Greece "because Greece is not a good example."
"I would say that on could extract conclusions on the work of Troika from the cases of Ireland as well as Portugal," he went on to say, pointing out that in Ireland problems arose from the troubled banking sector.
He noted however that problems in the banking sector deteriorate the situation in the public sector, pointing out that loans obtained for the recapitalisation of the banking sector are dealt with in a very different way from loans aiming at financing plugging the budged deficit.
Sharly also said on the other hand the loans a state obtains from refinancing purposes are very different from loans secured for other purposes.
"All countries are refinancing their debt and therefore that part should be seen very differently from the other part, because that is a part of the economy," he said.
Noting that this separation is necessary, Sharly underlined that "the sustainability (of an economy) does not change simply because you obtain funding of 4 or 5 billion EUR to cover the refinancing requirement for the next three or four years."
"That does not change the situation whatsoever and some times when you see the numbers you should be able to analyse and see the impact they have on the sustainability of the state," he concluded.
Cyprus needs to secure a total of 2.3 billion EUR for the recapitalisation of the Cyprus Popular Bank and Bank of Cyprus, severely hit by the Greek sovereign debt haircut. As the commercial banks cannot use Cypriot bonds as collateral to secure liquidity from the ECB, because the Cypriot bonds have been downgraded to the "junk" category from all three rating agencies, Cyprus on June 25 applied for financial support from the EU bailout mechanism.
