“It is vital to apply fiscal discipline rules both at the federal government and the states of the federation, including local authorities,” Georgiades said on Thursday at an event organised by DISY in Nicosia.

Generating public deficits in a post-reunification Cyprus will result to debt accumulation which in turn “would politically and economically place a ticking bomb in the foundations of the reunified state,” he said. “Equally important is the credible structure, capitalisation, operation and supervision of the banking system in the entire territory”.

“We therefore believe that it is important that to have now an evaluation and stress-test of banks operating in the occupied areas carried out by an independent body,” Georgiades said, adding that the asset-quality review should be based on “a credible methodology and assumptions”, in order to determine whether Turkish Cypriot banks are compliant with the European Central Bank’s pre-emptive supervision standards.

“If there is any need to take action, these measures have to be planned and taken the earliest,” he continued. “Otherwise, the stability of the reunited economy would be jeopardised”.

The two communities already converged in principle on the introduction of an “internal stability pact which will ensure the implementation of certain budget rules,” Georgiades added. “It is however important that this is also compatible with the European growth and stability pact”.

The finance minister, who oversaw the implementation of the country’s cash-for-reforms programme agreed three years ago, as well as the economy’s return to growth and the restoration of market access, said that, instead of diverting its attention to the “so called cost of a settlement”, the public debate should focus on the introduction of rules that would ensure sound public finances, a healthy banking system, and a favourable business environment post-solution.

“Let’s also keep in mind that any discussion on the cost of a settlement should include the cost of the non-settlement, even in the property question,” he said.

Source: Cyprus Mail