The European Bank’s of Reconstruction and Development (EBRD) operations in Cyprus would assist the country to address its short and medium-term challenges, Finance Minister Harris Georgiades has said, adding that Cyprus request EBRD`s recipient country status for a “limited time.”
Cyprus hit by recession since the second half of 2011 requested financial assistance in 2012 to cover its fiscal needs and rescue its banking sector. It received a €10 billion bailout in March last year featuring an unprecedented haircut on uninsured deposits couple with restrictions on capital flows that hampered further economic activity and impeded funding to the real economy.
“Whilst achieving key objectives of the programme, most notably fiscal consolidation and although the implementation of structural reforms and enhancing the regulatory and supervisory framework of our banking system provide the necessary conditions for accomplishing sound economic growth they are unfortunately not sufficient,” Georgiades said in a statement released to the EBRD annual meeting.
“Much additional work needs to be done to support recovery of the real economy of our country, especially in the current depressed economic environment of Cyprus characterized by strikingly by lack of conditions of financial stability and rapidly rising unemployment and widespread closure of business enterprises,” he added.
He added that with the banks having a substantial part of their funds tied up in non-performing loans and engaging in deleveraging and recapitalisation, there is a critical lack of lending capacity for financing small and medium sized enterprises, which are the primary source of output and employment in Cyprus.
Based on this situation, Cyprus, he went on to say, submitted at the end of 2013 a request for Cyprus to be granted EBRD recipient country status for “limited period of time”.
“We believe that EBRD`s operations in Cyprus would significantly contribute in addressing the short and medium-term financial, fiscal and structural challenges the country faces today,:” Georgiades said.
The vote on Cyprus` request will be held tomorrow. Later Georgiades and Suma Chakrabarti is expected to sign an agreement.