Cyprus Minister of Finance Harris Georgiades has said that despite optimistic data contained in the first review of the implementation of a Memorandum of Understanding (MoU), the basis of an international rescue, the government will not issue a revised economic forecast to the better.
In statements he made to the press after an Advisory Economic Committee meeting at the Ministry of Finance, in Nicosia, on Thursday, Georgiades also announced that the decree pertaining to the cooperative credit institutions will be ready within the next few weeks.
At the same time, he reiterated the government’s position that fiscal consolidation should not be based on the imposition of new taxes.
Recalling that the last time the Committee met was in 2011, Georgiades announced it will meet every quarter.
The Committee, he said, will be used as a means of briefing social partners and all participants on economic developments and progress achieved on the MoU’s implementation whilst participants will have the opportunity to discuss and exchange points of view on economic policy.
It is well known that the economy is going through difficult times, he pointed out, adding that the government has never tried to present the situation under a more favourable light.
At the same time, he reiterated the government’s determination to implement the adjustment programme, which whilst being difficult will place the country’s economy on a much “healthier and sustainable basis”.
Georgiades further acknowledged that the expression of different opinions is also useful in the government’s effort to shape the right policies.
Replying to question as to whether the ministry intends to change its forecast for the economy he made it clear that it does not intent to do so.
“We remain very conservative and cautious in our estimates and we will not be in a rush to consider that difficult times are behind us”, he noted.
Asked whether further measures will be needed, Georgiades said that great structural changes or the effort to place public finances on a healthy and sustainable basis “will not be implemented without measures and without decisions”.
Therefore, he added, certainly, there will be measures, policies, and decisions. He explained that the goal is to remain within the right framework following “our own decisions and planning”, so that third parties will never again be given the chance to define the country’s policy.
Referring to the government’s position on taxation, he said that fiscal consolidation will no longer be based on the continuous imposition of taxes, adding that the government does not believe that imposing taxes will be productive.
Georgiades explained however, that the government is obliged to push through with certain taxes, noting at the same time that the main aim is cost reduction and rationalization of public finances.
He also said that the government will intensify efforts in September to prepare the budget for 2014.
Replying to a question about capital controls the Cypriot Minister referred to the road map announced in August, which has to do with the adjustment programme’s implementation as well as with the progress achieved in the financial sector.
“Gradual easing will continue until they (capital controls) can be fully lifted”, he said, adding that “we are on the right track” and that “capital controls today are much milder than in the beginning”.
Cyprus and its international lenders (the European Commission, the European Central Bank and the IMF) agreed late March on a €10 billion bailout programme, which provided for a haircut on uninsured deposits in the island`s two largest banks.
Under the agreement, Cyprus Popular Bank, Cyprus` second largest lender, would be wound down and its good part will be absorbed by Bank of Cyprus, the island`s largest lender.
