The Cyprus government has made available €2 bln to ensure workers keep their jobs and help businesses to avoid bankruptcy amid the coronavirus pandemic.
Two schemes have been approved by the Cabinet and presented by Finance Minister Constantinos Petrides and Central Bank Governor Constantinos Herodotou.
The first scheme provides for a suspension of bank loan payments for a period of nine months, or end of December 2020.
The second provides government guarantees of up to €2 bln to banks to offer low-interest loans and to subsidize interest rates.
Petrides described the schemes as “bold” as they subsidize the market through the banking system and not the banking system itself.
Herodotou said the proposals protect the banks and urged them to proceed with measures that will be presented to the Central Bank which he added, is planning further measures.
The Minister of Finance said faced with huge economic challenges there need to be bold financial measures that will have a huge impact on public finances, but they will prevent a deep and prolonged crisis, allowing for a faster recovery.
After the Government’s consultation with the political parties, the two schemes are expected to be approved Friday by parliament.
Petrides said the Ministry of Finance has been working in full coordination and cooperation with the Central Bank of Cyprus (CBC) to combine, in the best possible way, both monetary and fiscal tools.
Regarding the suspension of loan payments for a period of nine months, he said it covers businesses, natural persons and self-employed who are consistent with their obligations to both the banks and other credit institutions.
For the implementation of the measure, a written request should be made to the financial institution.
The Minister said that while banks will have costs due to the suspension of payments, they are not expected to face sustainability problems due to the flexibility provided by decisions of the CBC and the competent European monetary authorities.
On the government guarantees, Petrides said that €1,750,000,000 will be granted as new low-interest loans to businesses and self-employed and €250,000,000 will partially subsidise the interest rate to individuals, self-employed and businesses.
Government guarantees cover 70% of the losses that could result from the above loans and banks the remaining 30%, regardless of whether the loan was secured or not.
Loans will last from 3 months to 6 years excluding current accounts with a maximum guarantee of 1 year.
The process of granting government guarantees to credit institutions will begin in early April and it is expected that the first loans will be granted in early May 2020.
There are also conditions for granting government guarantees to credit institutions as well as for the granting of loans, such as the maximum amount of loans that may be granted and the reasons for the loan.
Petrides said the funding is conditional on businesses and self-employed not going ahead with any layoffs before December 31, 2020.
The Central Bank Governor said the suspension of loan payments helps the real economy, households and businesses while safeguarding banks which will not be forced to recognize as non-performing loans the difficulties that people are experiencing.