CNBC Transcript: Interview with Harris Georgiades, Finance Minister of Cyprus

Following are excerpts from a CNBC interview with Julia Chatterley, and Harris Georgiades, Finance Minister of Cyprus.

JC: I'm joined by the Finance Minister of Cyprus, Harris Georgiades. Thank you so much for joining us. You're expecting a clean exit from the bailout programme next month.

HG: We have come a long way and yes we are ready to safely exit the support programme. We are back on growth. We entered the programme whilst being in a recession and now we're having growth rates around 1.5% and we have completely eliminated the deficit. We had a marginally negative deficit of 0.5% so that's well ahead of expectations and of course we have stabilised the banking sector so yes there has been good progress on all fronts and we can take it from here.

JC: Taking it from here, if we look at what is going on more broadly, the economic backdrop, the risk sentiment right now is pretty tense. Would that push you, or could it force your hand to perhaps request a credit line coming out of this bailout programme just to give you that extra back-up?

HG: No, we shall not be requesting a credit line but we remain very focused and very committed on maintaining the reform effort. Maintaining fiscal discipline and keeping a watchful eye on our banking sector exactly because no one can say that the challenges have gone either for Cyprus or for the European economy. So that's the answer. We do not need the programme, the programme is coming to its end as scheduled, but this does not signal a termination of the discipline and of the efforts that we have been making during the last three years. In fact our own reform agenda goes above and beyond the Troika programme so we shall continue and we are very confident that in doing that, we shall be safe and we shall convince the market that Cyprus is indeed back on track.

JC: You mentioned the banking twice and I do want to talk about this. The non-performing loans are still a huge issue. I've seen some statistics saying it's 46% of total bank lending, we're talking the equivalent of 156% of GDP, so it's still a real problem for the banking sector. You're working on perhaps off-setting some of these loans, selling them on to investors but do we have a problem in that actually the way they are valued by the banks could be far higher than they would be sold onto investors. I guess I'm asking you if there is a risk of more capital being needed in the banking sector?

HG: Capital in fact has been raised and that's a positive. The Cyprus banks are able to raise capital and they have done so and we have also raised provisions. NPLs are a challenge, they are high. They are left over of the boom and bust of the previous decade actually. But here also I am confident that we shall be seeing progress. The escalation will not show immediately amongst others, given the reporting handling of NPLs where you have to keep them on the red column for a year after they have been restructured but viable restructurings are happening. The fact that the economy is growing again obviously helps. So even on this front I am confident that with continuation of the efforts, without in anyway being complacent about it, that we shall be able to bring them down basically.

JC: So just to underscore the point again, you're not anticipating the banks needing any more capital because obviously, given the environment out there, it's going to be a tough job to achieve if you actually do need to raise more capital for the banks.

HG: They have been under tight scrutiny and they are well capitalised, well provisioned but even if at some period ahead of us, not imminently obviously, but if at some period ahead of us they would need capital they are perfectly able to raise capital. And that's what is offering confidence to the depositors and to investors.

JC: Thank you so much.