EXANTE's Communication Director Patrick O’Brien had an exclusive interview with the Finance Minister of Cyprus Harris Georgiades for the newspaper Times of Malta.
Three years ago, Cyprus was on the fringe of financial ruin and became the fifth eurozone member to take an EU bailout. Now, its economy has expanded at a seasonally adjusted annual 2.7 per cent rate in the first quarter of 2016, the second fastest in the euro area. The country's Finance Minister Harris Georgiades explains how the island nation has turned its fortunes around.
Cyprus has managed to achieve fiscal consolidation without raising taxes.
You have made enormous strides in restructuring the Cypriot economy. How would you describe the country's current economic climate?
I would say it has improved. Since 2013 we have promoted changes to our banking sector and completely and successfully consolidated public finances. We have also eliminated the deficit and are running on an essentially balanced budget. We have achieved this fiscal consolidation without raising a single tax. Instead we chose to reduce public spending and, as a result, we have encouraged the growth prospects of our economy. We have implemented a very ambitious reform and consolidation programme, in close cooperation with the International Monetary Fund and the EU. The key is to continue seeking and promoting reforms that will further enhance the competitive edge of our economy. As a confirmation of our efforts we have been able to reestablish market access.
The IMF recently outlined challenges which the Cypriot economy still faces, especially regarding non-performing loans. What decisions have you taken to ensure the country's future economic health?
I would say that the main challenges moving forward are the level of unemployment and the level of non-performing loans in the banking sector. All our efforts are essentially geared towards dealing with these leftovers of the boom and bust of our economy. Both problems will take time to correct. With regards to non-performing loans management, it was important to establish a new legal framework, as we did. However, the basic prerequisite is creating conditions for sustainable economic growth and renewed economic activity.
Cyprus Finance Minister Harris Georgiades
A large part of the country's economic output depends on financial and business services. What are the key advantages of Cyprus as an international business hub?
First of all, Cyprus is an EU member. We offer the stability and the credibility of an EU and euro-zone member state, but also various country-specific advantages. Our tax system remains very attractive and competitive. Secondly, our human capital is critical - we have become a hub of expertise on business and financial services and are more competitive and far cheaper compared to other major financial centres.
Foreign investment is no doubt key for Cyprus to maintain strong economy. How are you attracting investors?
Cyprus has proven to be a resilient and competitive economy, and an attractive destination for new business and investment. But at the same time we know that we can do even better. Ultimately, what needs to be ensured is sustainable growth over a longer-term horizon. And this, in turn, calls for a continuation of our efforts to create an even more competitive and adaptive economy, without the excesses and the imbalances of our recent past. The role of the banking sector will be important. The Cyprus banking sector has been completely revamped. Cyprus banks now operate under new owner-ship, new management, and with new capital raised through foreign investors and primarily under a much stricter and reliable supervisory framework. Of equal importance is the pro-motion of structural reform and positive change. Among others, we shall be tackling the problem of undue bureaucracy which regrettably exists in parts of our public administration.
A study commissioned by Bloomberg ranked Cyprus sixth among the countries that would be heavily affected by a Brexit in terms of per capita income. What are your views?
This is a question I try to avoid answering as I don't want to give the impression that I am intervening as a minister of a member state in a process in another member state. I have to say though that the negative consequences of a Brexit will affect the UK, and not necessarily other member states such as Cyprus. I am not sure whether there will be negative effects for the others and in Cyprus we have put in strong structures if something were to happen so any effect would be minimalised.
Cyprus has to ensure sustainable growth over a longer-term horizon.
Malta has been one of a handful of EU countries that have not had to resort to any bank bailout measures in the wake of the financial crisis. How do you view Malta's economy?
I congratulate Malta and its government for the work it has done to ensure its economic success and stability. Cyprus has many lessons to learn from the strict reforms set in Malta. We would like to follow Malta's example especially in the funds sector and its regulatory systems.