ECONOMY: Cyprus vows to maintain fiscal discipline and promote structural reforms

Cyprus President Nicos Anastasiades pledged his government will comply with EU fiscal rules to maintain prudent financial management and promote structural reforms that put the Cypriot economy on a sustainable growth path.

Anastasiades made the comments during the 10th Economic Ideas Forum organised by the Wilfried Martens Centre of European Studies and the Glafcos Clerides Institute.

In his address Anastasiades recalled his government assumed office in 2013 when Cyprus GDP shrank by 6% while the economy expanded by 4% in 2018 and forecast to grow in the medium term at a rate above the EU average.

He is also recalled that unemployment peaked at 16% and is now at 7.5% following a downward trend.

We are ready to adapt or adopt in consultation with the Parliament any reforms that might be deemed necessary in order to enhance our competitiveness and in particular all essential reforms in order for the public service to become more efficient and flexible in accordance with the best practices of other European member state.

In this context we are determined to maintain our compliance with the common fiscal rules as a country, which in the recent past has paid the price for careless management of public finances, we recognize that sustainable public finance management is a requirement for macroeconomic stability, we remain committed to maintaining a policy of a balanced budget.

Anastasiades pointed out that the EU must follow policy initiatives that help the EU economy compete on a global scale and not policies that erode their competitive advantages.

We remain firm in our position that certain policies including in the area of taxation should remain sovereign responsibility, he stressed.

The argument against policies that hamper member-states was supported by former Maltese Prime Minister Lawrence Gonzi who said small EU member-states such as Cyprus and Malta face major challenges that bigger countries in the EU don’t have.

The EU focuses on tax structures, without understanding that we have to balance the disadvantage we have sometimes balanced with tax features, he said.

During a panel discussion, Finance Minister Harris Georgiades said the lessons learned from the Cypriot crisis is that if we defy common logic there will be trouble.

If you are were spending a billion more than your income, if you have an unsustainable credit growth then there will be trouble., he said.

Marten Verwey, head of the European Commission’s Structural Reform Service who participated in the Troika missions during Cyprus’ economic adjustment programme, referred to the Cypriot financial crisis, citing the flight of Icarus.

A credit boom which lead to excessive optimism and wrong investment decisions and when credit conditions tightened the whole thing collapsed, Verwey.

Source: The Financial Mirror