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Solution will bring economic development

22/09/2015 22:56
President of the Republic Nicos Anastasiades said that a solution to the Cyprus problem will act as a catalyst for the economic development for the decades to come and with huge potential benefits for many sectors of the economy including energy, shipping, tourism and transport.

The President gave a speech entitled “‘Lessons from the Cypriot crisis and the road to recovery’ at the Chicago Council on Global Affairs before departing for New York to address the UN General Assembly.

The President referred to the situation when he undertook office, noting him and his economic team were well-aware that the economy was running into trouble as the financial sector had run an unsustainable credit boom for more than a decade, which fueled a property and consumption boom, the impact of the decision to impose a haircut on Greek sovereign debt left the Cyprus banks on the brink of collapse while there was a severe fiscal crisis and the public coffers were literally on the brink of exhaustion.

He talked about the efforts of the government to avoid an economic collapse, the reforms that had to be carried out and those that are still needed to achieve viable growth.

“The country was faced with an imminent economic collapse, comparable in its magnitude to nothing since the 1974 Turkish invasion. This was the time of Cyprus’ Great Recession and it was too late to request an election re-count!”

He said Cyprus could serve either as an example for other economies on the geographical periphery of the EU or, even, as an experiment for the Eurozone’s future policy design.

“To avoid the upcoming Armageddon and considering that the second largest systemic bank had already reached the point of no return, we had to adhere to an unprecedented and still questionable Eurogroup decision, which included a severe haircut of bank deposits”, the President remarked.

At the same time, “we also swiftly agreed on a programme of economic reform and fiscal consolidation”.

Anastasiades said his government had to make this programme work. “It was not easy. But for us there was no other option. Just two and a half years later, I stand before you and state with confidence that we expect a smooth and successful completion of the programme with the next few months”.

Most importantly, I can proudly present Cyprus as a success story of economic reform, said Anastasiades, noting the “Cypriot people displayed great patience and resilience and we have turned the page. We are emerging stronger from the crisis and we can be very optimistic for the future”.

Cyprus, he said, “has officially exited recession, and is registering growth as of this year. A much stronger growth than anyone had expected. We are on the road towards full recovery”, with a “restructured and fully recapitalized banking sector and with a strong presence of major US investors like Wilbur Ross and Third Point”, the fiscal imbalances fully addressed and Cyprus returning to the international markets much earlier than any other program country.

“We had to take very difficult and unpopular decisions. But thanks to the hard work of our people and the responsibility exhibited by the political parties across the political spectrum, Cyprus is entering a new era of growth and prosperity”, and an of sustainable prosperity”.

Many reforms, he said, have either concluded or are at an advanced stage of implementation, including a pension system reform, a bold welfare reform which includes streamlining the number of benefits, better targeting, and the establishment of a Minimum Guaranteed Income for all those in need, in parallel with an active labor initiative for those eligible, a public administration reform including a reform of the wage-bill, labour market reforms, a tax administration reform.

Other critical growth-enhancing reforms, have been already initiated; an ambitious privatizations programme, a digital strategy and a judicial reform. “We are also working on improvement of the business environment and we intend to transform our bureaucracy from a red-tape to a red carpet for investors”, Anastasiades added.

The President cautioned that it is the full implementation of the reform programme that will lay-down the foundations for sustainable growth in the long run. That will set the framework for attracting foreign direct investments in the productive sectors of the economy.

The President said the government`s quick reaction to the crisis and the front-loading of a reform strategy delivered and enabled it to restore access to the international capital markets and to bring the levels of the yields of Cyprus bonds at satisfactory levels, to facilitate the raising capital for the banks from big international investors, to fully lift the capital controls much earlier than anyone had expected and to encourage foreign investors to invest in key sectors of the economy of Cyprus, including tourism, shipping, marinas, energy and hopefully very soon the ports and a casino mega project.

He also remarked that we can be more productive by ensuring that fiscal consolidation and economic growth go in hand.
The Cypriot case is a part of the wider EU crisis, Anastasiades said which exposed the excessive imbalances, rigidities, and uncompetitive economic structures of many Euro-countries. It also revealed the flaws of the Euro-system.

“Cyprus has paid a big price, not only from our own wrong policies, but also from the weaknesses of the economic governance and supervision of the Eurozone and the EU”, the President remarked, adding he is convinced that Europe learned its lesson and is succeeding in changing itself.

Regarding the Cyprus problem, he said “we aspire to evolve the Republic of Cyprus into a federal union in the context of reaching a settlement to the 41 year old Cyprus Problem”. A settlement, he said, that will reunite the country, its people, the economy, and will establish good relations with Turkey and will comprise all the parameters conducive to economic development, business and investment; regional stability, and open markets”.

“This is what we are currently negotiating with our Turkish Cypriot compatriots”, he said, “to reach an agreement on evolving the Cyprus Republic to a carefully designed Federal structure that will work of Cyprus”. He also said with the EU now being a more active player, “we will continue contributing constructively at the negotiating table”.

He acknowledged the challenges and difficulties that lie ahead “but our responsibility towards our citizens is to do our best to succeed. And if we do, the solution will act as a catalyst for the economic development for the decades to come. With huge potential benefits for many sectors of the economy; Energy, Shipping, tourism, or transport are just the most obvious”.

“Only then we will allow Cyprus to utilize its full potential. If we relieve Cyprus of all the political barriers that prevent the full exploitation of its unique geographical position”, he added.

The solution of the Cyprus problem will be the most significant growth reform that we can achieve. A European solution that will benefit Cyprus, Europe, and Turkey as a constructive neighbor. Turkey should recognize both the prospect and the reality and facilitate the solution of this long-standing issue.

Cyprus, he said, “is at the turning point of history and is addressing all the big strategic questions of the future. The gas reserves discovered within our Exclusive Economic Zone, but also in our neighbourhood, worth billions of Euro, are destined to transform Cyprus into an important international energy hub”.

That is why, Anastasiades added, we will continue building bridges with our neighbors and we will step-up the efforts to re-unite our country. The next months are critical to this end.

Within this framework, our relations with the United States are of a strategic importance. “We have a vision to transform Cyprus and to unlock its full potential, for the benefit of its people”, he added.