The end of the economic adjustment programme of Cyprus is a big success according to ESM managing director Klaus Regling, who clarifies, in an official ESM communication, that challenges still remain to be addressed such as the non performing loans. Klaus Regling also prompts to a continuous surveillance regime, according to ESM treaty and early warning mandate.
Klaus Regling referring to the true meaning of the programme exit said that “the end of the programme for Cyprus is a big success particularly when we consider the situation in Cyprus three years ago when the programme started. The people of Cyprus really deserve credit for what has been achieved”.
He stressed that the fiscal deficit was almost eliminated, the Cypriot banking sector has been restructured, competitiveness of the economy has been restored. “We only needed to disburse about 70% of our programme, so about 2.5 billion euro less than initially committed,” he said and added that international investors were willing, again, to buy Cypriot bonds last year. “So with the end of the Cypriot programme we have now four success cases in the euro area after Ireland, Portugal, and Spain exited their programmes earlier”.
Furthermore, Regling explained the next steps in the overall adjustment stressing that “the ESM programme is over but challenges remain, of course. On the one hand the fiscal consolidation should not be put at risk, and at the same time reforms must continue. The single
biggest issue in Cyprus today are the non-performing loans of the banking sector; they`re the
highest in Europe. I find it reassuring that the president of the Cypriot Republic and the Finance
Ministers have emphasized their willingness to continue with the reforms, and to focus on the
remaining challenges”.
Finally, he referred to the future role of ESM in Cyprus and pointed out that “the ESM is the largest creditor of Cyprus, and therefore quite naturally we will look very carefully into economic and financial developments in the country. Our ESM Treaty actually forces us to do that, we call it the, ‘Early Warning System’ to make sure that the country can repay the ESM”.
Therefore, together with the European Commission, and the International Monetary
Fund who also have their own surveillance procedures, the ESM will, for the coming years,
continuously assess the performance of the economy, Regling said.