Economic potential of settlement ‘huge’, but no aid
The European Stability Mechanism (ESM) mandate does not allow financing a Cyprus settlement, its Managing Director said on Tuesday after a meeting he had with Cyprus President Nicos Anastasiades, noting that “at the moment that would not be possible without changing the ESM Treaty.”
In statements to the press Klaus Regling also said that it is impossible to quantify at the moment the cost of a settlement, stressing that he is convinced that in the longrun the economic potential of unification is huge, the Cyprus News Agency reported.
On his part, Finance Minister Harris Georgiandes, who also attended the meeting, said that the economic dimensions of the reunification of Cyprus are extremely important, adding that “we had a very useful discussion as regards these aspects, in view of a relevant discussion on the financial parameters of the Cyprus problem that will take place on Monday at the Eurogroup.”
He also said that they reviewed the general progress of the Cypriot economy and both the President and himself had the chance to reiterate the government’s commitment to continue efforts to promote reforms, and the prudent management of public finances even after the conclusion of Cyprus’ Programme. Regling recalled that he was in Cyprus about a year ago, adding that it was a good moment now to review the progress of the Cypriot economy during the last twelve months, about half a year after the end of the ESM Programme for Cyprus.
“And I think it is fair to say that Cyprus is reaping the benefits of the three-year adjustment programme that was linked to the ESM and IMF Programme. Good progress in many-many areas. Growth has come back. Unemployment is coming down and I am confident that will continue,” he noted. He said that there is commitment from the President and the Minister of Finance to continue with a responsible fiscal policy.
He noted at the same time that there is unfinished business in the area of public administration reform, local government, the health sector adding important for the reforms to continue.
He said that the work done so far has been recognised by rating agencies and expressed certainty that if reforms continue there will be more upgrades coming. “That is very encouraging,” he went on, adding that the banks that have gone through tremendous adjustments in the last few years have challenges. “They need to reduce their NPLs. The legislation is in place to do that. So I think the preconditions are there,” he added.
Asked what will be the impact on the Cypriot economy if a solution is found and it loans will be required to finance a solution, Regling said that this is one of the big issues, “how much money will be needed, loans.”
“But it is very hard to say before more details are known about the settlement, particularly on the property issue. So I think therefore it is impossible to quantify at the moment the cost. There will be cost. I am convinced that in the longrun the economic potential of unification is huge.”