Cyprus needed ‘drastic reforms’: President

Cyprus's bailout came with "harsh" terms but enabled the country to make much-needed reforms, its president told CNBC on Thursday.

This week, the Mediterranean island exited its three-year 10 billion euro ($11 billion) bailout to acclaim, after posting its best year of economic growth in seven years.

Nicos Anastasiades, the Cypriot president, said that the strict conditionality of the bailout package meant that necessary reforms to the banking sector, fiscal policy and state-run enterprises were made, rather than being blocked in parliament.

"Cyprus needed drastic reforms …. It was our obligation to face the crisis," the 69-year-old leader told CNBC via a translator.

Anastasiades came to power in March 2013 as the Cypriot banking system was collapsing and a bailout funded by the European Stability Mechanism and the International Monetary Fund was about to be announced.


Controversially, the aid for Cyprus was conditional on the use of depositors' uninsured savings above 100,000 euros to "bail-in" failing banks.

The outlook looked grim for the island, but it surprised naysayers and posted growth of 1.4 percent in 2015 after three years in deep recession.

Its economy is still accelerating, with growth of 1.5 percent for 2016 and 2.0 percent for 2017 forecast by the European Commission.

"We have contradicted all negative forecasts, all negative projections … we restored the credibility of our state and also of the banking sector," Anastasiades told CNBC.

In future economic crises, countries should focus on reforms that curtail state excesses without harming society's poorest members, he added.

"Strict austerity policies do not help if we ignore social cohesion or repercussions on vulnerable groups," Anastasiades said.

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