Icarus, Daedalus and the IMF re­port on Cyprus

Financial Mirror (Cyprus) - - FRONT PAGE -

Of­fi­cials at the In­ter­na­tional Mon­e­tary Fund, the third arm of the Troika of in­ter­na­tional lenders, must have mixed up their mythol­ogy when the for­mer IMF Head of Mis­sion to Cyprus likened the is­land’s econ­omy to a crash-and-burn sit­u­a­tion dur­ing a re­view of the is­land’s state of the econ­omy.

The IMF ex­ec­u­tive board met on Mon­day to dis­cuss the 2014 Ar­ti­cle IV Con­sul­ta­tion with Cyprus, the an­nual check up by the IMF of a coun­try’s econ­omy.

The con­sul­ta­tion looks at a coun­try’s econ­omy broadly and pro­vides pol­icy rec­om­men­da­tions go­ing for­ward. In the case of coun­tries with fi­nan­cial as­sis­tance, such as Cyprus, this takes place on a less fre­quent ba­sis. Cyprus’s last Ar­ti­cle IV con­sul­ta­tion took place in 2011. The pre­lim­i­nary con­clu­sions of the 2014 con­sul­ta­tion were pub­lished on June 30. Ac­cord­ing to the Cyprus News Agency, dur­ing the board meet­ing to dis­cuss the 2014 Ar­ti­cle IV Con­sul­ta­tion with Cyprus, Delia Vel­culescu, for­mer chief of the IMF mis­sion for Cyprus, likened Cyprus to Icarus, the mytho­log­i­cal fig­ure, who flew too close to the sun, burnt his wings, fell in the sea and drowned. Cyprus’ Dutch rep­re­sen­ta­tive to the board Menno Snel replied that con­trary to Icarus Cyprus has man­aged to float. He also likened Icarus’ fa­ther, Daedalus, to the IMF, not­ing that in Icarus’ case he did not heed his fa­ther’s ad­vice, while in Cyprus’ case, the IMF did not do as much as it should to avert the cri­sis. Vel­culescu is be­ing re­placed by Amer­i­can Mark Lewis. The 2014 Ar­ti­cle IV Con­sul­ta­tion fo­cuses more on the risks ahead and on what needs to be done rather than on progress achieved so far. It presents an ac­count of how the cri­sis came about and refers to the poli­cies im­ple­mented as part of the adjustment pro­gramme, as well as what should be done. Board mem­bers are said to have also dis­cussed the pend­ing mat­ter of the leg­isla­tive frame­work on fore­clo­sures which as they pointed out needs to be set­tled in or­der for Cyprus’ bank­ing sec­tor’s non per­form­ing loans to be man­aged and for the adjustment pro­gramme to con­tinue on track. The IMF’s mis­sion on the 6th re­view of Cyprus’ adjustment pro­gramme is not ex­pected to travel to Cyprus be­fore the be­gin­ning of 2015.

How­ever, a small tech­ni­cal team will visit Cyprus around Novem­ber 10 to re­view pend­ing or other mat­ters re­lated to prior ac­tions. Cyprus has so far has re­ceived five tranches amount­ing to 5.77 bln from the EU and the IMF from the 10 bln bailout pack­age.

The 6th Pro­gramme tranche of 433 mln euros was not dis­bursed in Septem­ber due to non-com­pli­ance in in­tro­duc­ing leg­is­la­tion on fore­clo­sures as de­manded by the Troika.

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