In a press conference, following the conclusion of the first programme review by the Troika mission, Georgiades said the positive review came due to "our clearplanning for the next state budget, the progress we made and our determination to rationalize our expenditure so that they would comply with the expect revenues." He however cautioned that significant challenges lie ahead. "Significant steps have been recorded," Georgiades said, pointing out however "great challenges are still ahead of us and therefore we will continue and intensify our efforts with no complacency." Asked on the positive issues recorded by Troika, Georgiades said the general review will acknowledge and will record that the course of the public finances are on track, without downgrading the effort to be taken in the drafting of the next budget.

Referring to the programmes second pillar, that of structural reforms, Georgiades said great effort is been exerted. "The implementation of these significant reforms is being promoted," he said. With regard to the financial sector, the Cypriot Finance Minister said the first review coincided with the completion of the resolution process for Bank of Cyprus "which in itself is a very important and positive development that contributes to the restoration of confidence to the banking system." Responding to a question whether he expects any surprises in the next Eurogroup meeting in September that will give the green light for the disbursement of the programme`s second trahche, Georgiades noted that although he does not wish to pre-empt the meeting, "the Government does not expect any surprises." Replying to another question, he said that "no additional measures are expected for 2013 as far as the public finances are concerned."

Georogiades noted that the government will continue the consistent and cautious management of the state budget and of the public finances both for the remainder of the current year but also for 2014. "The measures for the rationalization and reduction of the (public) spending to be included in the next state budget will be very serious," he went on to say. Replying to questions for Bank of Cyprus, Georgiades expressed the government`s disagreement over the final capital adequacy ratio of 12% that has been achieved following the completion of the haircut on uninsured depositsin the Bank as the assumptions used to determine the bank`s capital needs "were indeed too conservative." "Nevertheless, Bank of Cyprus is fully recapitalized with a very high capital adequacy index, which could boost the citizens` as well as the market`s confidence to the bank," he noted.

Excluded from international capital markets since April 2011, Cyprus applied for financial assistance from the EU bailout mechanism, as its two largest banks, Bank of Cyprus (BoCY) and Cyprus Popular Bank (CPB) requested state support following mammoth losses as a result of the Greek sovereign debt haircut. In late March, the authorities and the Troika (European Commission, European Central Bank and the IMF) agreed on a €10 billion financial assistance package which featured a haircut on uninsured deposits to recapitalize BoCY, whereas CPB will be wound down. Furthermore the package provides for major cuts in public spending and structural reforms.

The second tranche is due to be disbursed in the Eurogroup meeting on 13 September in Vilnius, Lithuania. The first trance, totaling 3 billion, was disbursed in two parts, two billion in May and one billion on June 26.

Source: Financial Mirror