Speaking at an event at the University of Cyprus on the island’s progress and prospects for the duration of the economic adjustment programme agreed with its international lenders (European Union and International Monetary Fund), Georgiades argued that the banking meltdown that culminated in the closing of Laiki Bank and the conversion of uninsured deposits to recapitalise the country’s largest lender – the Bank of Cyprus – was the result of disastrous delay in applying for a €10 billion EU bailout, which the previous government half-heartedly did in June 2012.

“This should have been done at least six months earlier, after Cyprus was excluded from international borrowing markets,” he said.

“In turn, the delay led to Laiki Bank passing the point of no return, and led the banking system into deep trouble.”

Following an overview of the errors and omissions that brought Cyprus to the brink of default, Georgiades highlighted the government’s achievements in stabilising an economy in a downward spiral in the 20 months since it has taken office. “We have addressed several challenges during this time,” Georgiades said.

“A disastrous 2013 was followed by the year of stabilisation, which hopefully will lead to a return to growth in 2015.”

Turning to the way forward, the finance minister said the government will strive to maintain lower inflation rates than the rest of the Eurozone, without slipping into deflation.

“Additionally, the public payroll, which has always been problematic, needs to be consolidated. Continuous, automatic expansion of both the payroll and the number of civil servants by every previous government are a thing of the past, and the policy of zero pay hikes and hiring has worked – we will be the first government to deliver a smaller, but more effective, public sector.”

Georgiades said that, having secured stability; the government now plans to focus on a strategy for economic growth and implementing necessary reforms.

Asked whether the government would consider using the €1 billion ‘cushion’ from the €10-billion bailout loan agreed with the Troika in 2013 for recapitalising the Cooperative Central Bank, which proved unnecessary after the CCB passed the European Central Bank’s stress test with flying colours last month, Georgiades said this would be a welcome scenario.

“We would certainly be interested in replacing more expensive, shorter-term borrowing using programme money,” he said. “However, such an arrangement would require our lenders’ consent. It is not something that has been tabled as of yet.”

Source: Cyprus Mail