Are we out yet?

Financial Mirror (Cyprus) - - FRONT PAGE - Anas­tasi­ades-Ge­or­giades an­nounce exit from bailout MoU Only 7.25 bln of 10 bln used; ex­clu­sion from ECB QE ‘is not news’

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.

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