Are we out yet?
President Nicos Anastasiades and Finance Minister Harris Georgiades announced on Monday that Cyprus had exited from the its three-year economic adjustment programme, adding that only three quarters of the EUR 10 bln bailout plan was utilised.
“The last Eurogroup on Cyprus’ memorandum. Three years of work and consistency. We continue the serious effort,” Anastasiades wrote on his Twitter account.
“Cyprus has exited the Memorandum”, Finance Minister Harris Georgiades said from Brussels after the Eurogroup meeting that reviewed the Cyprus programme.
He warned, however, that the serious effort must continue with credibility, away from irresponsible approaches, populism and the mistakes of the past.
“We owe it to our fellow citizens, especially those who have paid and are paying the cost of the derailment of our economy. We have come a great distance, we have left behind the recession, we have secured a second chance, but there is still much that remains to be done,” said the Minister. He added that what is now needed is to continue the prudent management of the economy, the political reliability in order to achieve upgrades of the economy, to establish growth, and leave behind the consequences of the economic depreciation of the past years.
He clarified that the condition is “that we will remain committed to this difficult but correct and necessary effort”.
“Cyprus has already returned to the international markets and certainly through the continuation of the effort will maintain this access,” he said, pointing out that the Eurogroup will state that Cyprus’ economy is clearly in a better condition than it was three years ago.
Cyprus is the fourth euro area member state to exit its bailout officially on March 31, following Ireland, Spain and Portugal. In all, EUR 7.25 bln of the total EUR 10 bln earmarked in the financial bailout had been utilised.
Meanwhile, as regards the continued exclusion from the European Central Bank (ECB) quantitative easing programme after the country’s exit from the economic adjustment programme, is no news, said Georgiades.
Commenting on a statement of an ECB spokesman to Reuters, that Cyprus is at risk of being excluded from the ECB’s sovereign bond buying as its credit rating is below investment grade, Georgiades said that this was something known in advance.
“This is not news. These are the rules of quantitative easing since the beginning of the programme. It was known in advance by everyone,” he said.
He added that Cyprus is already not participating in the ECB programme for not fulfilling a prerequisite of the MoU, concerning the privatisation of the stateowned telco Cyta.
The Finance Minister said that the last time that Cyprus, as a country took part in the project was in October 2015, while the only other time was in July 2015. He added that Cyprus could participate again in the programme after being classified in the investment grade by the rating agencies.
The Eurogroup congratulated on Monday, in a meeting in Brussels, the Cyprus economy and Finance Minister Harris Georgiades on the exit from the economic adjustment programme.
According to Eurogroup President, Jeroen Dijsselbloem, Cyprus can now finance itself and is back on a competitiveness track.
“It was the last Eurogroup before the end of the month,” said European Commissioner for Economic and Financial Affairs, Pierre Moscovici. “We need to give our compliments to Cyprus” he noted.
The Eurogroup issued a statement where it supported the Cypriot government’s decision to exit its macroeconomic adjustment programme without a need to roll-over the plan.
“The Eurogroup commends the Cypriot authorities for the overall successful implementation of the programme and the important achievements made in the past three years, and also thanks the institutions for their vital contribution towards this end”, said the statement.
The Eurogroup welcomed the fact that economic activity has continued on a positive trend, and the banking system has further healed.
“The commitment of the authorities and the Cypriot people to the overall programme agreements has also been essential to a fiscal performance that has exceeded expectations. These positive developments have been instrumental in regaining investor confidence in the Cypriot economy, with the sovereign returning to the international markets”.
Furthermore, the statement said that the Cypriot banking system has undergone a deep transformation and that the ground covered since March 2013 has been significant and the reform measures, which have been executed or are underway are essential to restoring the Cypriot financial system to viability. However, it pointed out that work must continue with determination to secure the reduction of the nonperforming loan ratio to healthier levels.
“This includes the rigorous and swift implementation of the insolvency framework and foreclosure laws adopted in 2015 together with further measures including the legislation on sale of assets and effective use of the full range of the available non- performing loan management tools”.
At the same time, the Eurogroup noted that the last ‘prior action’ under the current review has not yet been completed.
“The privatisation of the Cypriot Telecommunications Authority would be another growth-enhancing step. Along with public administration reform and other structural reforms discussed during the programme, this would cement the improvements in public finance and support sustained economic growth”.
The Eurogroup also mentioned that in total, about 30% of the EUR 9 bln programme envelope remains unutilised.
It welcomed the reaffirmed commitment by the Cypriot authorities to sustain public finances consolidation and the reform momentum over the medium term, in order to address the remaining vulnerabilities.
The Eurogroup notes that it will continue supporting the reform process in Cyprus, inter alia in the context of post-programme surveillance and of the regular EU and euroarea specific monitoring frameworks.
IMF Managing Director Christine Lagarde issued a statement on Cyprus’ decision to exit IMF’s Extended Fund Facility (EFF) arrangement as from Monday March 7, where she congratulated the people and the Government of Cyprus.
“I have received a letter from Mr. Harris Georgiades, the Minister of Finance for Cyprus, informing me of his government’s decision to cancel the Extended Fund Facility (EFF) arrangement, effective March 7, 2016. The Fund’s 36-month EFF arrangement was scheduled to expire on May 14, 2016”, said Lagarde.
At the same time she congratulated the people and the Government of Cyprus on their accomplishments under the economic adjustment programme, “which has delivered an impressive turnaround of the economy during the past three years”.
As she noted, the economy returned to positive growth last year, expanding by about 1.5%, the banking system is on a much more solid footing and workouts of nonperforming loans are accelerating, opening space for new productive lending, the fiscal position has been restored to a sustainable path, and public debt is now firmly on a downward trajectory. In addition, she noted that, Cyprus regained access to international capital markets and successfully issued three Eurobonds during the past 21 months.