EU com­mis­sion­ers in­quire about ‘bal­anced bud­get’

Financial Mirror (Cyprus) - - FRONT PAGE -

Pierre Moscovici, Com­mis­sioner for Eco­nomic and Fi­nan­cial Af­fairs, Tax­a­tion and Cus­toms, and Valdis Dom­brovskis, Com­mis­sioner for the Euro and So­cial Di­a­logue and Vice-Pres­i­dent of the Euro­pean Com­mis­sion, have writ­ten to Fi­nance Min­is­ter Har­ris Ge­or­giades ask­ing him to ex­plain the medium term ob­jec­tive of a bal­anced bud­get in struc­tural terms in 2017.

“A pre­lim­i­nary as­sess­ment of the DBP sug­gests that Cyprus plans to de­part sig­nif­i­cantly from its medium term ob­jec­tive (MTO) of a bal­anced bud­get in struc­tural terms in 2017. The struc­tural bal­ance is ex­pected to de­te­ri­o­rate by 1.9 pp of GDP com­pared to 2016. The re­cal­cu­lated struc­tural po­si­tion is ex­pected to de­te­ri­o­rate from a sur­plus of 1.5% of GDP in 2015 to a deficit of -0.1% of GDP in 2016 and fur­ther to -2.0% of GDP in 2017,” the Com­mis­sion­ers said in their let­ter.

While it is true that the out­put gap es­ti­mates de­rived from the com­monly agreed method­ol­ogy are sub­ject to un­cer­tainty in the case of Cyprus, there seems to be a num­ber of mea­sures that lead to a sig­nif­i­cant re­lax­ation of the fis­cal stance, it added.

“In line with the pro­vi­sions of Ar­ti­cle 7 of Reg­u­la­tion (EU) No. 473/2013 of 21 May 2013, we are writ­ing to con­sult you on the rea­sons why Cyprus plans a change in the struc­tural bal­ance in 2017 which is well be­low the re­quire­ments of the pre­ven­tive arm of the Sta­bil­ity and Growth Pact,” it noted.

The Com­mis­sion, it said, “seeks to con­tinue a con­struc­tive di­a­logue with Cyprus in or­der to come to a fi­nal as­sess­ment. We would wel­come your views by 27 Oc­to­ber 2016, close of busi­ness, to al­low the Com­mis­sion to take these into ac­count in its fur­ther anal­y­sis. Our ser­vices stand ready to as­sist you in this process.”

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