The Cyprus case has raised the inability of regulators, including the International Monetary Fund (IMF) to ring louder bells before an economic crisis, said Wednesday Executive Director for Cyprus at the IMF, Menno Snel, in a statement which is included in the Fund`s report on Cyprus under chapter D.
“The Cyprus case has raised important policy issues, not least in the areas of modern bank resolution, program design and timing, the size of financial systems/institutions, corporate governance as well as the inability of regulators or other international economic surveyors – including the Fund – to ring louder bells in the years leading to this”, Snel stressed.
Moreover, he said that even as some of these issues feature prominently in international fora, including last week’s Annual Meetings, some of the answers remain elusive.
He pointed out that Cyprus` story also serves as another stark example of how inaction can lead to severe economic dislocations.
“In a still fragile environment such as the current one, it is a timely reminder that timid policies will only postpone underlying problems which will come to haunt the country later on”, he underlined.
Snel said that as the story unfolds itself, it may also prove that firm upfront action can lead to a faster adjustment than otherwise.
“Faced with an unprecedented economic shock in the island’s modern history, the authorities have come a long way in addressing the crisis. As staff concludes, a number of challenges remain”, he went on to note .
But Snel underscored that nevertheless, following eighteen months of strong implementation Cyprus finds itself in a good place to continue along the agreed path.
He explained that the authorities are cognizant that the achievements to date will be jeopardized if there is a hint of complacency and are therefore determined to push through their commitments even as headwinds have emerged.
“With continued guidance from staff and careful policy design for the remainder of the program, the authorities are confident that Cyprus will soon return to growth and broad-based economic prosperity”, he concluded.
Cyprus agreed on March 2013 with its international lenders, collectively known as the Troika (EC, ECB, IMF) a €10 billion bailout. So far the country has received five tranches amounting to 5.77 billion from the EU and the IMF.
The 6th Programme tranche was not disbursed in September 2014 (€433 mln) due to non-compliance in introducing legislation on foreclosures as demanded by the Programme partners.