Putting Cyprus on the road to recovery: President

After a period of hesitation and inaction, which climaxed last year in a crisis for Cyprus' banks and economy,my government is now at the height of its efforts to consolidate and reform our economy.

It's been a very hard process. As part of last year's rescue package for Cyprus, the Eurogroup imposed a bail-in for the uninsured depositors in two of the country's systemic banks. This was admittedly very difficult and has resulted in a further drop in economic activity, a further rise in unemployment and, dealt a major blow in confidence towards Cyprus.

Nicos Anastasiades.
Georges Gobet | AFP | Getty Images
Nicos Anastasiades.

However, the recession in 2013 was less severe than originally feared. The performance of the tourism, shipping and professional services sector demonstrated strong resilience. Meanwhile, fiscal targets for 2013 have been met with considerable margin and the financial sector is also showing signs of stabilization.

These results have been attained, mostly through the determined implementation of the Economic Adjustment Program. The first pillar of this Program relates to the restructuring, recapitalisation and enhanced supervision of the banking system. Considering that the banking system was on the brink of collapse, the progress achieved so far has been quite remarkable. The capital controls imposed after the decisions by the Eurogroup are gradually being lifted according to an agreed road map, leading to their full abolition.

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The second pillar deals with fiscal consolidation. From a very early stage, we have been determined to do whatever is necessary to bring public finances on a corrective course.

The final pillar concerns structural measures such as reform of the public sector, health care and welfare and, of course, the privatisation prospects of state-owned enterprises. It is through such reforms that we will build the foundations of a new, more viable and more sustainable economic model for Cyprus.

It is my firm belief that by fully implementing all the provisions of the Adjustment Program, the confidence to our economy can be restored. All assessments by the European Central Bank, International Monetary Fund and our fellow euro countries – known as the troika – on our progress have so far been positive, while rating agencies have also given good reviews on Cyprus' recent performance.

Looking ahead, the situation remains challenging, especially in the banking sector where the level of non-performing loans is still high. Moreover, the diminished lending to the economy and the relatively high interest rates are bearing down on economic activity.

To this end, specific measures have been taken to support enterprises through funds from the European Investment Bank and better use of of EU funds. A campaign has also started to attract foreign investments by the promotion of mature projects with promising rate of return. We have already seen foreign businesses expressing their interest in investing and this can be interpreted as a further sign of returning confidence in the Cyprus economy.

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It is my firm belief that the establishment of a unified economy, in the context of a viable political solution, is a key prerequisite for the well-being of both Greek and Turkish Cypriots. A reunification of the island will have a decisively positive impact on the local economy and will be a catalyst for regional stability and cooperation. It is for this reason that the resolution of the problem of the division of Cyprus remains the single most important priority of the Government of the Republic of Cyprus. We hope that the other side as well as Turkey will share the same vision of peace, stability and cooperation in our region, in order to reach a comprehensive solution the soonest possible.

I would like to emphasise that my government acknowledges that there are significant risks and challenges ahead. At the same time, we are confident that the economic recovery will soon materialise. This is because of the significant comparative advantages of the economy and the emergence of new sectors of economic activity -- such as the the recently discovered offshore natural gas. Through the disciplined implementation of the Adjustment Program, the decisive efforts of the Cypriot people and with the support of our European partners and the IMF, Cyprus is on its way to recovery.

Nicos Anastasiades is the president of the Republic of Cyprus. Follow him on Twitter @AnastasiadesCY

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