Cyprus introduced controls on the movement of capital in March to prevent huge capital outflows after the small Mediterranean island was forced to close down one of its two biggest banks and restructure the other. It has been gradually relaxing the controls since April. “Already the restrictions, which are in place now are much much looser than they were in March,” Georgiades said on the sidelines of a Brussels meeting of European Union’s finance ministers debating aspects of the planned banking union. “The intention is to maintain pace and momentum not in abstract terms, but in very specific terms that will relate to their relaxation and eventually their full lifting. It is a progression of months not years.”

While controls on the movement of capital within Cyprus are to be removed early next year, Georgiades’ comments signal that rules restricting the movement of money outside of the country will also soon be lifted. The full removal of capital controls, the first of their kind since the launch of the euro, could mark a further milestone in overcoming a financial and debt crisis that has dogged Europe for more than half a decade. Financial transactionsin Cyprus are now vetted, and there are daily cash withdrawal limits at banks. The island, which was forced to accept heavy losses on large bank savers, has seen deposits shrink dramatically this year.

The latest ECB data shows Cyprus has lost about 30 percent of its deposit base over a 17-month period. But Georgiades said this was part of the planned scaling down of the country’s once over-sized banking sector. Georgiades also said that he would come up with a plan for the sale of state assets by the end of the year. The sale of individual stakes in state-owned companies, he said, would be taken on a case-by-case basis. “We need to come up with a plan soon, as far as privatisation is concerned,” he said. “I would say by the end of this year.”

In separate statements to the media, Georgiades said implementation of a bailout agreement with international lenders will win back the trust of the markets and enable Cyprus eventually to return to normalcy without depending on anyone. The lenders’ second positive review was a step towards that direction, Georgiades said, adding that Cyprus still had some distance to cover. He added that the government will not relax despite signs of resistance by some sectors and better than expected performance of public finances. “We never celebrated or painted a pretty picture, but we know that this is the way to return to recovery earlier,” Georgiades said of the terms of the bailout.

He said the government will be wading deeper on structural matters as time went by, including the reform of the island’s wasteful civil service. “We dragged our feet in previous years, now a study is being carried out by foreign experts and we must make decisions in 2014,” he said.

Source: Cyprus Mail