You won the presidential elections amidst challenging times, do you think Cyprus is ready for change and the hard work necessary to rebuild its economy?
The dire financial situation I inherited meant that from the very first day in office my government had to immediately resume negotiations with the Troika to conclude a loan agreement. Any additional delay would have led the country to total bankruptcy as the Emergency Liquidity Assistance of the two largest banks was discontinued, the banks were closed and they couldn’t reopen without an agreement. The choice was either to lead the country to disorderly bankruptcy, which would have meant the total collapse of the banking sector including the loss of all deposits or to accept an unprecedented yet manageable situation, which would eventually lead to stabilisation and economic recovery – ending a long period of economic instability and catastrophic inaction. We conscientiously chose the latter. It was a historic, but painful decision, not taken light-heartedly. I wholly acknowledge and share the understandable bitterness and apprehension of the people of Cyprus, as well as of the non-resident depositors. I am also fully aware of the difficulties they are facing, as well as the financial losses they have suffered. The way forward is not easy but I am confident that if we are serious and decisive, base our arguments on facts instead of rhetoric, do away with populism and instead follow a road of responsibility, we can achieve a lot.
After tough negotiations, Cyprus reached a financial bailout agreement with the European Commission, the European Central Bank and the International Monetary Fund. With the agreement finally in place, what areyour immediate and longterm priorities in office?
Our immediate priority is the stabilisation and restructuring of the banking sector and the exit of the Bank of Cyprus from its ‘resolution’ status. Already, numerous restrictions on transactions and capital movements have been lifted and we hope that soon conditions will permit for all restrictions on financial transactions to be abolished. We also have to implement all the necessary measures and reforms agreed with the Troika and I am pleased that the first tranche of €3 billion of financial assistance has been approved, demonstrating that we are on the right track. A priority of utmost importance is to restructure and revitalise the economy and to modernise domestic policies. I have already presented a first set of measures to mitigate the problems faced by the vulnerable groups of the population, as well as measures and incentives that encourage investments and support growth. I have also announced a set of measures constituting part of my vision as regards to the need for a new state model, based on concepts like meritocracy, virtuous administration, the accountability of state officials and politicians to the electorate, the obligations of the state towards its citizens, as well as tackling bureaucracy and non-transparency. To guarantee that all decisions reached are fully implemented, a monitoring mechanism has been established with the obligation to submit monthly reports to myself and the Council of Ministers. These measures are not exhaustive and more will follow, as well as the necessary structural changes needed to achieve a sustainable growth model.
Following the Eurogroup decision to approve the bailout you stated that Cyprus was unfairly treated as a ‘guinea pig’ for testing the economic theory for enforcing a haircut on bank deposits. Why do you think Cyprus was treated in this way and how would you describe the current EU-Cyprus relationship?
The most competent people to answer the question of why Cyprus constituted the model for enforcing theories not applied to any other EU partners, should be the Troika and our Eurozone partners. During extensive contacts with my EU counterparts and high-level officials of the EU institutions before the Eurogroup agreement, I conveyed a clear message: Cyprus is not asking for special treatment, but expects just and fair treatment based on the same terms and conditions applied to all other EU partners in need. Regrettably, we found ourselves to be the recipients of demands for the adoption of extreme and unconventional measures, which were not imposed on any other EU member state applying for a bailout or on any country globally. Feasible counter proposals put forth by my government to avoid a haircut on bank deposits during the March 15 Eurogroup meeting were bluntly rejected.
As regards to the current relationship between the EU and Cyprus, it must be stressed that it was the founder of my political party, Glafkos Clerides, who set the course, steered the way and finally secured the accession to the EU family – and this is a course from which we will not deviate. We remain faithful to the process of further European integration, as we believe the EU is the unifying framework of our future. Cyprus will remain a committed and efficient partner and will continue to honour and promote our institutional role and assist in the progress of the collective European project. Our aim is to achieve our full, equal and credible participation in all EU pillars and policies. This is aptly signified by the immediate decision to submit an application for accession to the Partnership of Peace.
Throughout its history Cyprus has proven resilient in the face of challenges. During this period of economic difficulty, what opportunities are there for growth and investment in Cyprus?
Despite its current economic difficulties, Cyprus remains an attractive investment destination thanks to its almost 50 double tax treaties, highly qualified and professional workforce, its fully EU-harmonised tax and legal system and one of the most competitive corporate tax rates in Europe at 12.5%. Cyprus is a highly-competitive centre for international businesses, offering a platform for their operations and a preferential access to markets like Europe, Russia, China, India and Asia.
The discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone creates tremendous prospects for investments and cooperation in the energy sector and auxiliary services, presenting new opportunities for growth in the well-established legal, financial services and even construction sectors. The stability of Cyprus and its location opposite the Suez Canal are important factors favouring the creation of a regional energy hub on the island for natural gas transportation from Eastern Mediterranean countries to the EU and Far East markets at a comparatively low cost.
The country’s maritime sector continues to be an important contributor to growth, as Cyprus is considered one of the most important international hubs for ship owning and management services, and Cyprus’ international ship register ranks third in the EU and is the tenth largest in the world. Tourism is also expected to continue to be a growth factor and we are taking measures to diversify our tourist product and develop niche markets such as agro, medical and sport tourism. The decision to establish casino resorts is also expected to create new investment opportunities.
Additionally, the measures I have already announced include favourable tax incentives for existing or new companies doing business in Cyprus, fast-tracking of permits for large projects and tackling bureaucracy, these are expected to positively supplement efforts to increase Cyprus’ competitiveness and create a more effective and business-friendly environment. Opportunities also exist in the promising field of Renewable Energy Sources, a sector in which Cyprus has made remarkable progress. Promising areas of growth can also be found in agriculture, green growth, real estate, telecommunications, health, innovation and technology and commerce.
What are your views on the current debate to privatise state assets to boost the economy?
As already agreed in the Eurogroup agreement and the relevant Memorandum of Understanding, the government will initiate a plan that will include the involvement of private strategic investors in State Owned Enterprises (SOEs), semi-governmental organisations and real estate/land assets in order to restore debt sustainability by raising €1.4 billion. Our vision is to use this opportunity to improve economic efficiency through enhanced competition and to attract big investors. At the same time, one of our main priorities will be to protect the jobs of the employees working in organisations subject to divestment, restructuring or liquidation.
Do you think there continues to be misconceptions about Cyprus? The country’s taxation came under scrutiny in the press during the bailout negotiations, with allegations of money laundering and tax evasion. Why do you think these allegations emerged and how would you respond to them?
Cyprus has fully adopted and implemented all international measures and in some areas we even go beyond international standards to combat financial crime. Cyprus’ anti-money laundering measures have been repeatedly evaluated successfully by the Committee of the Council of Europe, Financial Action Task Force and the International Monetary Fund. Undoubtedly mistakes were made in the past, not only in Cyprus, but also in Europe and around the globe. Since then, Cyprus has implemented a comprehensive framework to combat money laundering and terrorist financing. As a regional and international business centre, Cyprus considers the fight against money laundering among its top domestic and foreign policy priorities.
The MONEYVAL evaluation in 2011 rated Cyprus very favourably compared to other countries, Cyprus is also on the OECD White List and has implemented all EU directives related to issues of transparency. We are open to any justified requests for investigation – we have the necessary laws in place and have solid cooperation with the respective Financial Intelligence Units (FIUs) and law enforcement authorities of numerous other countries. It is important to highlight that this assessment was once more verified by the Eurogroup meeting of May 13, following the results of the independent audit on Cyprus’ anti-money laundering framework. However, we are not complacent and are committed to working together with our EU partners in implementing any further improvements that are deemed necessary.
The current economic situation has somewhat overtaken the political issue of the division of Cyprus. You supported the United Nations reunification plan – the so-called Annan plan – which was rejected in 2004 by the Greek Cypriots. What is your current stance on the issue and when are the reunification negotiations due to restart?
The Cyprus problem was and shall remain the greatest challenge for us. It pertains to our national survival and is a common cause. No one, neither the President of the Republic nor a political leader, can shoulder alone the burden of managing our national problem. Collectiveness is required on the basis of an assertive strategy. At this critical economic juncture for Cyprus, our pressing priority is to address the present economic challenges and to restore the stability of the financial system. This fact in no way implies that we are not committed to the reunification of Cyprus, on the basis of the relevant UN Security Council Resolutions – which provide for a bizonal, bicommunal federation with a single sovereignty, single citizenship and a single international personality – and the EU’s values and principles, its institutional legal framework and the acquis communautaire. We seek a reunification, which will restore human rights for all the citizens of Cyprus, both Greek and Turkish Cypriots. In the coming months, we will be able to launch a new procedure for resolving the Cyprus problem, always under the auspices of the UN, but with the substantial involvement of the EU and not neglecting Turkey’s fundamental role as the country exercising absolute control over the decision-making of Turkish Cypriots. The adoption of a number of confidence building measures before the start of negotiations could however pave our way forward and kick-start our efforts.
What is your vision for Cyprus and how do you see the country developing in the next five years?
We are determined to live up to the expectations of society and serve its interests through the adoption of a daring and well-balanced policy of modernisation, structural reform and growth. No doubt we are facing extremely challenging conditions, but there are no easy or immediate solutions. We have, however, drafted a medium term results-oriented strategy that will bear fruit over time.
My vision for Cyprus for the next five years is to promote growth, encourage foreign investments, increase Cyprus’ competitiveness and create a more effective business environment. Only through growth can we create jobs and tackle unemployment. We must establish a social safety net for those in real need – the unemployed, pensioners and other vulnerable groups, as well as refugees and the enclaved. We need to achieve systematic consistent co-operation between the executive, legislative and judiciary powers, as well as with the independent institutions of the country and restore the trust of citizens in politicians and state institutions. My vision is also to follow a new foreign policy dogma, aimed at investing in the interest that lies in the viable resolution of our national problem, safeguarding the exploitation of our natural wealth and promoting Cyprus as a business centre with the attraction of foreign investments. This includes enhanced participation in all EU pillars and policies, credible cooperation with EU member states and the upgrading of already good bilateral relations with the US, Russia, China and other countries.
My foreign policy doctrine undoubtedly involves efforts to contribute to regional peace in our immediate neighbourhood through initiatives with clear aims such as: Building primarily a new relation between Cyprus and Turkey which will lead to the solution of the Cyprus problem and will put an end to the occupation and to the violation of human rights. Turkey’s military occupation of Cyprus is a destabilising factor for dynamics and the security of the Eastern Mediterranean. It is our firm belief that a just and viable solution to the Cyprus problem is in the interest of peace and security in the Eastern Mediterranean. A Cyprus solution on its own is far from enough in the transformation of the region and in the finding of durable solutions to long-standing complex problems. Nonetheless, a settlement in Cyprus that safeguards for all its citizens their fundamental human rights and basic freedoms, will undoubtedly have a very important collateral influence on achieving and maintaining a much-needed environment of stability and peace in our turbulent region and will prove of undeniable value for other disputes and conflicts. Cyprus could also prove to be a fundamental pillar in energy cooperation between the countries of the Eastern Mediterranean. My government is determined and committed to the construction of a Liquefied Natural Gas plant. Creating a network of natural gas transportation projects in the Eastern Mediterranean will also serve as a means to potentially strengthen regional energy security and attract foreign investments, leading to job creation; this should serve as a boost to the economies of all the countries in the region. Energy should not be a source of conflict, but a tool for conflict resolution and regional integration.
I am fully aware that we have a long way to go before fulfilling the vision of a stable, secure and prosperous Eastern Mediterranean. However, I believe that by achieving the implementation of all of the three concepts described, in conjunction with the fact that Cyprus is not burdened with hidden agendas, the faster we will attain this goal to the benefit of the wider region.
BIO
Nicos Anastasiades is the 7th President of Cyprus and assumed office on 28 February 2013. A lawyer by profession and founder of law firm Nicos Chr. Anastasiades & Partners, he has also had a long career in politics. Anastasiades was first elected to the House of Representatives in 1981 and was the leader of his centre-right political party the Democratic Rally (DISY) from 8 June 1997 to 28 February 2013. He graduated in law from the National and Kapodistrian University of Athens and completed postgraduate studies in shipping law at University College London.
Nicos Anastasiades was born 27 September 1946.
