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Cyprus Internet Directory [ Central Bank boss says he can't rule out Cyprus seeking bailout ]

Central Bank boss says he can't rule out Cyprus seeking bailout

George Psyllides

CENTRAL Bank Governor Panicos Demetriades yesterday did not rule out Cyprus seeking a bailout from the EU as long as this would benefit the economy.

"We should not rule out anything as long as this can benefit the economy," Demetriades told reporters after a meeting with DISY chief Nicos Anastassiades.

"Anything that is done must be done for the good of the economy, the good of the banking system," he said.

Wary of the experience of debt-stricken Greece and keen to maintain its coveted low-tax status for businesses, Cyprus has so far done its best to avoid turning to its eurozone partners for any financial aid.

It received a €2.5 billion loan from Russia in late 2011, disbursed in three tranches from December 2011 to April 2012.

The Central Bank Governor said he understood people’s concerns about entering the support mechanism, especially as regards the tax regime.

He added: “Countries like Ireland have kept their tax regime despite joining the support mechanism. I believe, in general, we must be calm to tackle all problems in the best possible way.”

Anastassiades said the effort must be for any support to be without strings attached, provided that Cyprus will display fiscal stability and shows it is serious about its obligations.

“If this is achieved we may avoid further complications even if borrowing is needed,” the DISY leader said.

Anastassiades this week met Eurogroup chairman Jean-Claude Juncker.

Seeking an EU bailout has become a real possibility after the state decided to underwrite a €1.8 billion equity issue by the Popular Bank, which is heavily exposed to Greek debt.

Earlier yesterday, Finance Minister Vassos Shiarly said if Cyprus puts the necessary measures in place then it could “get funding through the mechanism without substantial conditions.”

The ministry is currently processing a package of measures to tackle a slight deviation – around €150 million -- from the 2.5 per cent deficit target it has set for 2012.

“One cannot say that the package is perfect, but it is the best under the circumstances,” Shiarly said.

The minister has not revealed his intentions so far and “I think this worked in our favour.”

Shiarly also appeared optimistic he will resolve the thorny matter of the cost of living allowance (CoLA) before the end of next month.

Reforming CoLA is a pledge made by Cyprus to the European Union.

Former finance minister Kikis Kazamias raised the CoLA issue at the end of last year, saying it must be reformed to make it fairer.

As it was, it benefited the high-earners, for whom a two-per cent CoLA translated into a lot more money than for someone on a low salary.

(Source: Cyprus Mail)
Copyright © Cyprus Mail 2008 Please contact Cyprus Mail for the copyright terms of this article.

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