A detailed plan to lead Cyprus’ economy out of the woods by the end of 2015 was presented to the cabinet this week. The four-point plan includes foreclosures, political consensus, credit agency updrades and CyTA sell-off.
In presenting the plan, Finance Minister Harris Georgiades made clear to his government colleagues that the plan’s success is fully dependent on approval of the foreclosures bill by parliament and the collective political will of implementing the Memorandum of Understanding (MoU) agreed in 2013 with the Troika (European Commission, ECB, IMF).
Government sources told the Cyprus Weekly that the foreclosures bill, currently stuck in parliament could be approved by the end of March or early April at the latest.
The island’s bailout programme has been on hold pending the House’s approval of the legislation package. Once the bills are passed – even partly under a deal involving governing party Disy and centrist Diko to protect a debtor’s primary residence – Cyprus could realistically hope for a positive report by the major credit rating agencies.
The government’s primary aim is to get the status of the economy upgraded. With a green light from the Troika indicating that the programme is back on track and a positive outlook from the credit agencies, the Finance Ministry is planning another bond issue by the summer.
A similar exercise was successfully implemented last year when the MoU with the Troika was on track and the foreclosures saga hadn’t begun. With an eye on the 2016 parliamentary elections, government officials have already started to argue that by the year’s end, the public will see changes in both the economic data and their monthly bank balance.
Georgiades has so far played down this probability. Through speaking with close associates, the CW understands that the Finance Minister believes international lenders can only regain trust in the Cyprus economy through the presence of political stability and support for the bailout programme, similar to the environment at the start of the MoU’s implementation in Cyprus.
President Anastasiades and his close advisers believe that beyond the foreclosures issue, the final major hurdle is privatisation of telecommunications giant Cyta. The CW understands that companies from Europe and the Gulf have expressed credible interest in the company.
Though the opposition parties firmly refuse to approve privatisation legislation, the government hopes the news of major foreign interest can turn the tide. A recent poll has indicated that a majority of Cypriots support Cyta’s privatisation, with a positive mood also detected among the personnel.
Trade unions remain fundamentally opposed to the state company going private.
Government officials are encouraged by some signs of improving economic performance. Foreign company registrations (many from Greece) have increased, the construction sector has started moving again and car sales have risen.
An increase in holiday bookings by Cypriots completes the positive picture, although projections about the performance of Cyprus’ tourist industry are pessimistic for 2015.
The government says it hopes to partly supplement the drop in arrivals from Russia with increased bookings from the UK.