Cap re­stric­tions lifted, Pres­i­dent eyes jobs and growth

Financial Mirror (Cyprus) - - FRONT PAGE -

Cyprus lifted all cap­i­tal re­stric­tions on Mon­day that were im­posed on the is­land two years ago when the econ­omy reached a melt­ing point and in­ter­na­tional lenders of­fered a EUR 10 bln bailout plan, con­di­tional to re­build­ing the over­bor­rowed bank­ing sys­tem and re­form­ing the public sec­tor.

“The full lift­ing of cap­i­tal con­trols marks the full restora­tion of con­fi­dence in our bank­ing sys­tem and the sta­bil­i­sa­tion of the econ­omy,” Pres­i­dent Ni­cos Anas­tasi­ades said on Fri­day, an­nounc­ing a se­ries of mea­sures that aim to boost growth and cre­ate new jobs.

He said that Cyprus was now on “a course of to­tal re­ver­sal of an un­prece­dented cri­sis we were called to deal with. We man­aged to avert to­tal col­lapse and re­store the in­ter­na­tional cred­i­bil­ity of our coun­try, to sta­bilise our bank­ing sys­tem and … to exit from the mem­o­ran­dum”, signed with the Troika of in­ter­na­tional lenders.

He added that “in­di­ca­tions sug­gest that we may not need all EUR 10 bln from the mem­o­ran­dum and some of this money may be bet­ter utilised as low-cost fi­nance to fund devel­op­ment projects.

The Pres­i­dent an­nounced six key mea­sures to re­vive the econ­omy.

Th­ese in­clude lift­ing all re­stric­tion on cap­i­tal trans­fers, launch­ing public devel­op­ment projects and in­fra­struc­ture worth EUR 280 mln, fast-track­ing Euro­pean In­vest­ment Bank lend­ing, in­cen­tives to boost jobs, in­cen­tives to boost the con­struc­tion and tourism sec­tors, and speed­ing up and trans­parency of the ten­ders process for public con­tracts, with harsh sanc­tions for those who break the rules.

Anas­tasi­ades said the Cabi­net de­cided on Thurs­day to speed up devel­op­ment projects worth EUR 200 mln within 2015 in the ar­eas of en­vi­ron­men­tal and town plan­ning, sew­er­age and in­fra­struc­ture, and road im­prove­ments.

A fur­ther EUR 80 mln will be used on ma­ture projects such as up­grad­ing of hos­pi­tals and build­ing new health cen­tres, con­struc­tion and up­grad­ing of schools, and im­prov­ing the tourist in­fra­struc­ture and road net­works, with all projects ex­pected to get un­der­way by the au­tumn.

As re­gards EIB funds, Anas­tasi­ades said that the a gov­ern­ment guar­an­tee will al­low the sec­ond phase of the Uni­ver­sity of Cyprus cam­pus to get un­der­way at a cost of EUR 162 mln for new fa­cil­i­ties and lab­o­ra­to­ries, as well as a so­lar park that will make the cam­pus self-suf­fi­cient on en­ergy.

He said that the Cabi­net also ap­proved a se­ries of nine sub­sidy schemes for em­ploy­ment, gain­ing of work ex­pe­ri­ence and train­ing of the un­em­ployed at a cost of EUR 58 mln. Last year, he added, four sim­i­lar pro­grammes were im­ple­mented that gave jobs to 6,200 peo­ple and that this year that num­ber may be ex­ceeded.

As re­gards ex­tend­ing Sun­day shop­ping hours, the Pres­i­dent said that his ad­min­is­tra­tion ac­tively sup­ported lib­er­al­is­ing the re­tail sec­tor and as a re­sult, some 7-7,500 were em­ployed, al­beit on a part-time ba­sis.

He said the fi­nanc­ing for all the mea­sures will come from the EUR 400 mln bud­get sur­plus recorded in 2014 and Euro­pean funds.

The Coun­cil of Min­is­ters also de­cided to boost pri­vate in­vest­ments by ex­tend­ing the pe­riod for town plan­ning in­cen­tives, in­tro­duced in April 2013, es­pe­cially in the con­struc­tion and tourist in­dus­tries.

An­swer­ing ques­tions from the press, Anas­tasi­ades said that the prospect of con­vert­ing the Bank of Cyprus emer­gency liq­uid­ity as­sis­tance (ELA) owed to Euro­pean bank­ing au­thor­i­ties into long-term bonds, was raised twice with the Euro­pean Cen­tral Bank.

“This is a sen­si­tive mat­ter which can­not be dis­cussed in public, nor is it al­lowed (by ECB reg­u­la­tion). On the other hand, ELA does not pre­vent de­pen­dent banks from mov­ing ahead,” he said.

In its an­nual re­port for 2014, Bank of Cyprus said ELA had been re­duced to EUR 7.4 bln and di­rect ECB fund­ing to EUR 880 mln, while by March 31 this year, ELA and ECB fund­ing were fur­ther re­duced to EUR 6.9 bln and EUR 800 mln, re­spec­tively.

As re­gards tap­ping into Euro­pean Com­mis­sion chief Jean Claude Juncker’s EUR 300 bln growth bud­get, the Pres­i­dent said that the Fi­nance Min­istry, CIPA and the cham­ber of com­merce KEVE are work­ing to iden­tify large and ma­ture projects to of­fer to for­eign in­vestors.

Avoid­ing to give a pro­jec­tion for growth rates, Anas­tasi­ades said the an­nounced mea­sures aim to boost pros­per­ity of the gen­eral public and in turn the gen­eral num­bers. He said that with con­fi­dence re­turn­ing, and yields on gov­ern­ment bonds now be­low 4%, the gov­ern­ment may re­turn to the in­ter­na­tional mar­kets soon af­ter April 17, when par­lia­ment is ex­pected to fi­nally ap­prove the long-over­due frame­work on fore­clo­sures and in­sol­ven­cies, while se­cur­ing pri­mary homes in cases where mort­gage hold­ers are bank­rupt.

As re­gards hy­dro­car­bons ex­plo­ration, Anas­tasi­ades de­nied that the na­tional ‘en­ergy plan’ was put on hold.

“They con­tinue. Noble En­ergy said it will an­nounce its com­mer­cial plans, we have re­newed our con­tract with To­tal and ENI is read­just­ing its pro­gramme due to tech­ni­cal rea­sons af­ter two failed drills.”

“But all oil ma­jors are cur­rently re­vis­ing their plans due to the fall­ing crude prices and in ef­fort to cut back on ex­plo­ration spend­ing.”

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