Christos Stylianides was speaking after a meeting between President Nicos Anastasiades, the finance minister and bank brass. The Central Bank governor was out of the country and did not attend. “For the first time in years we have had a fundamental reduction in deposit interest rates, which anyone who knows fundamental economics understands, comes with an analogous reduction in borrowing rates because of market rules,” Stylianides said.

He added that yesterday’s discussion made clear that the drops, both real and expected, would offer funding solutions to “productive sectors of the economy”.

Stylianides said they could not intervene in the free market, conceding however that both government and the banking regulator believe that lower interest rates would benefit the market. “There is also market competition and we hope this leads to a further reduction of interest rates,” he said.

However, ruling DISY leader Averof Neophytou said that his party had submitted a bill to penalise banks imposing over than a 3.0 per cent interest rate on deposits. He said he hoped efforts by the government and the Central Bank bore fruit so it would not be necessary to pass the bill into law.

If interest rates drop, then many more borrowers, households, and small to medium size businesses will be able to service their debt reducing negative impact to the whole of the economy and the banking sector, Neophytou said.

Anastasiades also met yesterday with the planning bureau’s executive team to discuss its new role in light of Cyprus’ agreement to a memorandum of understanding (MoU) with its international lenders.

The planning bureau is getting a fancy new name, and will now be referred to as the General Directorate of European Programmes, Coordination and Development. This is to reflect its upgraded duties, Stylianides said.

The Directorate, formerly known as the Planning Bureau, will be in charge of monitoring the MoU’s implementation and coordinate development policies set by the Anastasiades government. Civil servants from all the ministries will be seconded to the Directorate, Stylianides said.

Development proposals will be evaluated and prioritised “especially when it comes to formulating strategies to promote research and innovation,” Stylianides said. The Directorate will continue supervising EU funds for both the public and businesses including providing information to relevant parties.

Cyprus must now target its use of funds available via the European Union, Stylianides said.  “We need a better planning framework in light of the serious economic crisis, as well as evaluating development needs as they may arise at any given moment,” Stylianides said.

Source: Cyprus Mail