Cyprus News Agency: News in English, 11-12-08

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From: The Cyprus News Agency at <http://www.cyna.org.cy>

CONTENTS

[01] Finance Minister: Fiscal consolidation a challenge for the economy

[02] President attends EU Council

[03] CoE satisfied over Cyprus action against money laundering

[01] Finance Minister: Fiscal consolidation a challenge for the economy

Kazamias noted that, ``due to the tight timeframes, we must all act immediately and decisively, otherwise the Council of Finance Ministers will impose sanctions, as provided for in the new financial governance framework, which has recently been agreed on a European level.``

``However, the main issue is that, if we do not regain our lost credibility as an economy, the markets will continue to demand prohibitive interest rates in order to provide funding, with all the subsequent consequences,`` he pointed out.

Kazamias said ``these facts make the budget for 2012 very crucial and determining for the future course of the Cypriot economy,`` adding that ``with a great sense of responsibility, the Government has drafted the budget, keeping in mind the aims it has set.``

He also expressed ``the readiness and determination of the Government to directly and effectively tackle all open issues before us,`` adding that the fact that the political parties and social partners acknowledge that the economy is going through a tough period and that solutions must be found together, can only send encouraging messages.

``No one`s shoulders and no political or social group`s will is enough to bear the weight of the responsibility we have before us. The Government, not having the parliamentary majority in its favour, has nothing to gain from the opposition if the budget is voted in. On the contrary, the opposition can demand the credit for its responsibility. If the budget and the proposed bills are dismissed, the opposition will have nothing to gain from the Government and the ruling party but will lead the economy and the country in general into a deeper crisis. And from such a situation no winners or losers will emerge but simply the country and the social group will lose,`` he said.

Kazamias said the budget was prepared taking into consideration the adverse conditions and significant challenges faced by the economy, mainly due to the global financial crisis, which is expected to spill into 2012.

Referring to current developments and challenges, Kazamias said the interventions of central banks and governments globally to support the financial sector and the real economy have contributed to the return to positive growth rates, but nevertheless the debt crisis, the high fiscal deficits and the banking sector problems hinder full recovery.

He noted that the Cypriot economy has managed to record some improvements in the first half of 2011 but was hindered by the global financial conditions. The seasonally adjusted GDP recorded a drop of 0.7% during the third quarter of 2011 compared to the second quarter, and the yearly growth rate is projected to reach 0.5%.

Furthermore, unemployment is expected to be around 7.5% in 2011, compared to 6.2% in 2010. Inflation reached 3.4% in January-October 2011 and for the whole of 2011 is projected at 3.5%. The current exchange balance deteriorated slightly and the deficit reached 673 million euros. The public deficit is expected to be around 6% of the GDP and the public debt is expected to reach 65.5%.

Kazamias also referred to recent developments in the EU and the Eurozone, and noted that the Republic of Cyprus has to draft its fiscal policy taking into consideration the new frameworks set out by the EU.

Referring to the financial policy and overcoming the crisis, Kazamias referred to the measures taken by the Government for fiscal consolidation and social cohesion, and noted the policy the Government follows for the long-term viability of public finances, employment and restraint of the public payroll, social benefits, increase of income, development, the banking sector, real estate, and the labour market.

Kazamias also pointed out that on 13 July 2010, the Excessive Deficit Procedure was activated for Cyprus, due to the fact that it has exceeded the 3% public debt ceiling and, according to EU decisions, it must reduce its public deficit below 3% by 2012. Furthermore, he said, if Cyprus does not adopt adequate measures by December 15, the next stage of the Procedure will be activated, which provides for sanctions.

The Minister of Finance said the budget was based on fiscal consolidation, economic growth and social cohesion, and referred to the Medium-Term Fiscal Framework for EU member states, which concerns drafting a one-year budget, taking into consideration long-term fiscal planning.

Referring to the prospects for 2012, Kazamias said that the global financial environment in 2012 is expected to be characterised by instability and uncertainty, and noted that the debt crisis in the Eurozone is expected to constitute a catalytic factor in the course of the European currency, which is crucial for the prospects of Cyprus` services, such as tourism.

He said the Cypriot economy would continue to face challenges in 2012 and that the necessary correction of public finances and the restricted allocation of resources to the economy would affect the growth rate, which is expected to be borderline positive at 0.2%.

Furthermore, unemployment is expected to worsen and inflation is expected to drop to 3%. The fiscal deficit for 2012 is expected to be around 2.4% of the GDP, while the public debt is expected to be around 67%.

[02] President attends EU Council

The summit is pivotal to the future of the Eurozone, and the economic crisis will be the main topic of discussion.

EU leaders are expected to exchange views on the reflections by the euro area member states on the strengthening of economic convergence within the euro area, on improving fiscal discipline and deepening economic union, including exploring the possibility of limited Treaty changes.

In the margins of the European Council, the Accession Treaty with Croatia will be signed.

The European Council will begin with a working dinner.

[03] CoE satisfied over Cyprus action against money laundering

According to a report issued today by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), the CoE underlines that Cyprus has taken additional measures to combat the phenomenon, applying in parallel supplementary legislation and lining up to the suggestions MONEYVAL has proposed in an earlier report.

The MONEYVAL report also notes that Cyprus legislative framework on mutual assistance with other states and international organisations is very strong.

It adds that following the legislations implementation concerning property confiscation, the number of people that have been sentenced on charges of money laundering has increased.

Some concerns are being raised however, concerning immovable property transactions and the trading of precious stones and metals, while the report adds that monitoring authorities should be supported with more funding.

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