Speaking at the 17th annual conference of Greek and Cypriot organisations abroad, Finance Minister Harris Georgiades said this amounted to savings of around €700 million.The aim is to reduce the public deficit to around €500m next year and ensure a primary surplus by 2016, a step closer towards Cyprus returning to international markets for capital.

He assured overseas Cypriots that the government’s policy focused on curbing spending, not imposing new taxes, adding: “We will secure taxation stability. We lived beyond our means” both in the public and private sector, he told the audience. The Cypriot state was spending more than it earned, and not on development projects, creating continual deficits and a growing debt, said the minister.

At the same time, banks were lending money beyond the means of the real economy, with the money directed towards consumption. “In just three years from 2005 to 2007, private lending doubled.” The two factors combined proved lethal. “We had excessive borrowing and unsustainable credit expansion and at the same time a state which spent more than it should,” he said.

Georgiades described the adjustment programme Cyprus agreed to with its international lenders (European Commission, IMF and European Central Bank) as a “very difficult and ambitious” one, stressing however that the government will stick to it. “We want to limit next year’s budget by more than 10 per cent. This is not easy but this is what we will pursue, ensuring also stability of tax yields and thereby the prospect of attracting new investments and encouraging entrepreneurship.”

Once government got a grip on public finances and reduced expenditures it would also lower the tax burden, he said.The government also planned to make significant structural changes, referring to the new social welfare policy, new healthcare plan and “ambitious” reform of the public sector. Regarding Cyprus’ battered banking sector, the minister argued that it was stabilising day by day.

Source: Cyprus Mail