Greece and Cyprus to support economic activity amid inflation crisis while maintaining fiscal stability

The task of supporting economic activity and the vulnerable amid rising inflation fueled by the Ukrainian crisis, while maintaining fiscal stability was discussed in panel discussion during the first Famagusta Business Forum, in the presence of Ministers from both countries and representatives of commerce and business chambers from Greece and Cyprus.

Ministers of Finance of both countries agreed that the new crisis is fueled by rising energy costs and high inflation.

Christos Staikouras, the Greek Minister of Finance said following the financial crises and the Covid-19 pandemic “there is a new crisis ahead of us, an energy crisis and a crisis of inflation,” noting however that the current crisis does not fundamentally alter the Greek economy’s basic characteristics.

He said the Greek government is striving to take additional measures to support business activity and the households from the rising energy costs.

The Greek government, Staikouras added, has set specific targets including the return of the Greek economy to investment-grade status by 2023 and the exit from the EU’s enhanced monitoring by this summer.

There should be a gradual and safe fiscal stability and for this reason “we have built a safe and realistic path” with a return to primary surpluses, he said.

On his part Constantinos Petrides praised the two countries’ exit both from their financial crises and the Covid-19 pandemic.

“Now we have a new crisis, which is different from the previous ones,” he said, adding that “this is an inflationary crisis which will not be easily over and it will a big hot potato in the hands of the governments,” he said.

Noting that this is the first time we see such inflationist trends with structural characteristics, due to the war in Ukraine, but as well as due to EU policies for green growth and the very auspicious targets for decarbonisation “which will not come without cost.”

Furthermore, representatives from chambers from both countries highlighted the need for strong public finances as both Greece and Cyprus are vulnerable to external shocks.

The issue of investment opportunities in the Eastern Mediterranean in the era of crises was the subject of the third roundtable discussion in the framework of the Famagusta Business Forum.

In her intervention, the Minister of Energy, Trade and Industry Natasa Pilides said regarding the developments in trade and industry in Cyprus that despite the challenges there is an upward trend, with Cypriot companies showing tremendous resilience.

On energy, the Minister said medium- and long-term measures have to do with the interconnection of Cyprus with the European market through the Israel-Cyprus-Greece electricity cable, which has secured 650 million in funding from the EU, while plans for energy storage sponsorships are expected later this year.

On his part, Greece’s Development and Investment Minister Adonis Georgiadis said that the Greek government has taken a series of measures aimed mainly at increasing the disposable income of citizens to address the issue of high prices, while it has also reduced various taxes, made two consecutive increases in the minimum wage and introduced a series of subsidy policies aimed at preventing a very high pressure on the energy market that can cause both social instability and a major drag on the economy.

Subsequently, Cyprus’ Health Minister Michael Hadjipantela said that the crisis due to the war in Ukraine is not new to Cyprus as the country has already faced and overcome problems regarding the availability of certain medicines as many pharmaceutical companies have concentrated in the last two years on manufacturing vaccines, while a second problem that the country managed to overcome was the access to medicines of British origin after the UK’s withdrawal from the European Union.

Hadjipantela added that lately and despite the crisis, there are several companies that want to invest in the health sector in Cyprus, citing as examples the acquisition of private hospitals by large investment funds and the recent acquisition of NIPD by a Norwegian group.

Commenting on developments at the European level, Hadjipantela said that one of the first issues he raised as Cyprus’ Health Minister was access to cheap medicines and proposed the creation of a single mechanism for the purchase of medicines similar to the one used for vaccines, which is only now beginning to be discussed.

Finally, the Permanent Secretary of the European Coordination and Development Programmes and Secretary of the Council of Ministers, Theodosis Tsiolas, said that the fact that the Cypriot economy since 2013 has not relied on Russian deposits meant that the crisis in Ukraine would not affect the banking sector, however the effects of the crisis are affecting tourism, where efforts are being made to make up for the losses.

Source: Cyprus News Agency