A total of €100 million will be injected in the Cypriot market after the loan agreement signed here today between the European Investment Bank (EIB) and the Republic of Cyprus.
In addition to the €100 million resulting from the loan agreement, the EIB is also planning for this year to finance the Electricity Authority of Cyprus (EAC) with €50 million for its electricity distribution network and with other € 130 million for its fifth generation unit at Vasiliko power plant, raising the total funding to around € 300 million.
Moreover, 50 million euro will be granted to Cooperative Central Bank of Cyprus and another 100 million euros for the guarantee fund for Small and Medium Size Enterprises, for which an agreement was signed last year.
The loan agreement was signed at a special ceremony by the Finance Minister Haris Georgiades and EIB President Werner Hoyer, in the presence of the Bank’s Vice President Mihai Tanasescu.
Finance Minister thanked the EIB for its continuous and long-lasting cooperation with Cyprus, adding that the EIB is hugely important for Cyprus.
“We are here to sign today yet another loan agreement at such a difficult situation for our economy. It is well known that we are undergoing a very difficult transformation”, he said, noting that “the commitment of the Cypriot government to carry through the programme of reform and fiscal consolidation has also been made absolutely clear but at the same time”.
At the same time, he added, it is equally important that “we shall need a helping hand and I am delighted that this helping hand is offered today”.
Replying to a question, Georgiades said that the loan is granted with exceptional terms with long repayment period and with a low interest rate (2%). “And it is therefore a very supportive development for the Cypriot economy underway,” he said.
On his part, Hoyer said that “it goes without saying that if a member state is in deep trouble and we are aware that Cyprus is, then the Bank must be available for support and we are happy to do so”.
“We are committed to Cyprus and the Cypriot people and our focus and role is to support projects that benefit the real economy and to support job creation”, he added.
He noted that “we are very much aware of the very difficult situation for the Cypriot people, it takes endurance, perseverance and resilience and we appreciate that because is difficult and every single case that goes the wrong way is an individual tragedy and a loss for the country”.
So, he said, “we must try to be helpful in fixing the very difficult situation of the country”.
He went on to say that “I am admiring the resolve with which the authorities are addressing the problems by not simply looking back but first of all by looking to the future and there we can be quite optimistic in view of the fact the right decisions have been taken, the resolve is there, the results will show as well”.
“In this way we are going to be helpful, we are going to be creative in the development of the programmers and projects in progress”, he added.
He said that it is important that “we can work through the banks on the ground and the situation on the ground here in Cyprus is difficult as everybody knows. Therefore we are so much interested in the quick restructuring of the banks and we very much welcome the ambitious targets set by the Minister for the restructuring of the banks so that we can find the direct banking partners again beyond the cooperative bank in Cyprus quickly and we can increase our business”.
“That needs to be seen in the context of the restoration of confidence and trust into banks”, he said.
“I can understand the feelings of many people that they are fed up with banks and they have lost their trust but without a functioning banking system it is not going to work anywhere in the world”, he concluded.
Excluded from capital markets since May 2011 Cyprus applied for a bailout in June 2012, after its two largest banks requested state aid following massive losses amounting to €4.5 billion as a result of the Greek sovereign debt haircut and to cover is growing fiscal needs.
Cyprus and the Troika of the European Commission, the European Central Bank and the International Monetary Fund agreed on March 25 on a €10 billion bailout which included imposing losses on bank uninsured deposits as well as fiscal consolidation measures amounting to 7.2% of GDP by 2016.