12/03/2013 09:01
The troika insists and puts on the table all contentious issues for the Cypriot side, such as the increase in corporate tax, extraordinary levy of interest on deposits and the privatization of the semi-governmental organizations, according to President of the National Economy Council Nobel laureate Christoforos Pissarides.
Mr. Pissarides, speaking this morning on state radio, explained that once the negotiations are ongoing and the memorandum has not yet been signed, those issues are not deleted for the creditors despite the fact that some of them make less intense or strong opinions.
He clarified that since talks are still ongoing, the Cypriot negotiating team hopes that some issues might be won, since it has the ability to argue or cite other proposals and suggestions to avoid claims that would cause further cracks in the economy.
Mr. Pissarides did not rule that even if corporate tax, which, as has been leaked, will reach 12.5%, can be reduced to lower rate.
"It is not important," he said, "in what percentage we will end up with the creditors but to convince them that any increase should remain there for many years as it had remained for about 10 years at 10%. This will contribute to raise uncertainty of the Cypriot side and part of the foreign investors”.
Invited to comment on media reports in recent days that the haircut of deposits and the tax on financial transactions are a past for the troika, Mr. Pissarides reiterated that theoretically everything is on the table.
"The international creditors haven’t told us anything definitive. But, in my view, troika’s demands that will have serious impacts on the economy and the financial system of the country will be the haircut of deposits and the tax on financial transactions. This position was expressed strongly and obtrusive to the heads of the troika by President Anastasiades”, he said.
He also expressed the view creditors might show some flexibility on the two issues, given that the adoption of these claims will affect the EU and particularly the eurozone, as we all agree. “And here, because of the sensitivity of the issues, there may be a positive conclusion for the Cypriot side”.
He noted that the imposition of a levy on financial transactions is a serious point of contention between the UK and the EU and this clash might help Cyprus.
Asked why the troika although there was a preliminary agreement with the previous government in relation to the memorandum brought haircuts, privatization and banking taxes to the table, Mr. Pissarides explained that this change in attitude came after Pimco’s report and creditors have estimated that the total amount of financial assistance is about €17 billion, which they consider unsustainable.
"Personally, I believe it is wrong, but the troika is has its own view. And since they say it is unsustainable, they suggest we should find money from somewhere else, while at the same time the do not take into account the prospect of revenue from natural gas. That's why they say they will not give us €17 billion, but less, about €10 billion. And in this context, they claim an increase in corporate tax, which for me it will not work. Then, they brought back the issue of privatization and fortunately they did not put on the table further wage cuts. And I hope they will not to do that”.
With regard to yesterday's meeting between President Anastasiades and the Greek Prime Minister and the information that the Greek and Cypriot government elaborate a formula for the recapitalization of the banks, he said they will promote the idea of Cypriot banks and especially the two large ones to be regarded as Greek and their recapitalization will be undertaken by the Greek troika and the Greek government.
"That would be ideal," he said. “The troika, however, insists on a smaller-size of banks and we must not forget that such a development will help our banks to reduce their liabilities”.
Mr. Pissarides, speaking this morning on state radio, explained that once the negotiations are ongoing and the memorandum has not yet been signed, those issues are not deleted for the creditors despite the fact that some of them make less intense or strong opinions.
He clarified that since talks are still ongoing, the Cypriot negotiating team hopes that some issues might be won, since it has the ability to argue or cite other proposals and suggestions to avoid claims that would cause further cracks in the economy.
Mr. Pissarides did not rule that even if corporate tax, which, as has been leaked, will reach 12.5%, can be reduced to lower rate.
"It is not important," he said, "in what percentage we will end up with the creditors but to convince them that any increase should remain there for many years as it had remained for about 10 years at 10%. This will contribute to raise uncertainty of the Cypriot side and part of the foreign investors”.
Invited to comment on media reports in recent days that the haircut of deposits and the tax on financial transactions are a past for the troika, Mr. Pissarides reiterated that theoretically everything is on the table.
"The international creditors haven’t told us anything definitive. But, in my view, troika’s demands that will have serious impacts on the economy and the financial system of the country will be the haircut of deposits and the tax on financial transactions. This position was expressed strongly and obtrusive to the heads of the troika by President Anastasiades”, he said.
He also expressed the view creditors might show some flexibility on the two issues, given that the adoption of these claims will affect the EU and particularly the eurozone, as we all agree. “And here, because of the sensitivity of the issues, there may be a positive conclusion for the Cypriot side”.
He noted that the imposition of a levy on financial transactions is a serious point of contention between the UK and the EU and this clash might help Cyprus.
Asked why the troika although there was a preliminary agreement with the previous government in relation to the memorandum brought haircuts, privatization and banking taxes to the table, Mr. Pissarides explained that this change in attitude came after Pimco’s report and creditors have estimated that the total amount of financial assistance is about €17 billion, which they consider unsustainable.
"Personally, I believe it is wrong, but the troika is has its own view. And since they say it is unsustainable, they suggest we should find money from somewhere else, while at the same time the do not take into account the prospect of revenue from natural gas. That's why they say they will not give us €17 billion, but less, about €10 billion. And in this context, they claim an increase in corporate tax, which for me it will not work. Then, they brought back the issue of privatization and fortunately they did not put on the table further wage cuts. And I hope they will not to do that”.
With regard to yesterday's meeting between President Anastasiades and the Greek Prime Minister and the information that the Greek and Cypriot government elaborate a formula for the recapitalization of the banks, he said they will promote the idea of Cypriot banks and especially the two large ones to be regarded as Greek and their recapitalization will be undertaken by the Greek troika and the Greek government.
"That would be ideal," he said. “The troika, however, insists on a smaller-size of banks and we must not forget that such a development will help our banks to reduce their liabilities”.
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