He specifically referred to the conditionality surrounding the financial assistance provided by the European Stability Mechanism. Cyprus received a €10 billion bailout from the ESM and the IMF in a bid to avert a financial meltdown in 2013.
“Contrary to the belief that a tight fiscal policy always leads to a deeper recession, the real economy has been recovering. As of this year we are out of the recession, expecting growth rates nearing 1.5% with an even more positive outlook for the years ahead,” he said.
He said that being in a programme meant that tight fiscal targets had to be met, but added that how Cyprus chose to meet them is important.
“We took a knife on public expenditure. We stopped hiring in the civil service and we froze public sector wages. Credible eligibility criteria for welfare were imposed. State owned organisations that had run their course were closed. We found savings from spending items across the budget,” he said, adding that Cyprus “completely eliminated the deficit, practically over a single year.”
Georgiades emphasised that the government had not raised taxes over the past two and a half years.
“We actually reversed the policy of tax and spend and ensured tax stability. In fact we have gradually and cautiously begun to offer tax incentives,” he said.
“This, together with the restructuring and re-capitalisation of our banks, re-established conditions of stability of confidence,” he added.
But he noted that “the economy of Cyprus is still facing challenges, including high unemployment and a high level of non-performing loans, but is already on track to become even more competitive, with viable public finances, a healthier banking sector and on a path of sustainable growth.”
“But for this to happen, for growth to be sustainable in Cyprus and across the EU, it is imperative that the effort of structural reform and positive change which unbounds markets and offers a breathing space to the productive sectors of our economies, does not lose momentum,” he said.
“And if we are to achieve this, we must be able to resist the challenges of populism coming from the extreme left or the extreme right,” he concluded.
Source: InCyprus
