Cyprus had almost come under EU supervision due to its excessive deficit after the implementation of the Co-operative Central Bank decision which rocketed the deficit projection at 4.8% of GDP. This exceeded the maximum 3.0% of GDP by 60%.
Informed sources told Phileleftheros that, on a technocratic level, Commission services considered that Cyprus (plus three other Member States) should come under “excessive deficit procedures” provided in the bloc’s Stability and Growth Pact.
However, Commissioner Christos Stylianides argued during the debate carried out on a political level at the College of Commissioners on May 29 that Cyprus’ economy has already returned to levels agreed by the Stability and Growth Pact. And, therefore, it would not be correct – for formalities only – for Cyprus to come under excessive deficit procedures and – in effect – under supervision. The leadership of the Commission had backed Stylianides’ arguments, according to an informed source.
If a state exceeds the maximum government deficit, that is 3% of GDP, then it is obliged to enter a supervision process for a calendar year, with whatever this may imply. However, the interventions that took place prevented the excessive deficit procedures from being applied in the case of Cyprus.
A letter sent by Finance Minister Harris Georgiades, from whom the Commission had asked clarifications, played a big role in this. The Minister had underlined the island’s 1.8% surplus of GDP in 2017, and explained that the 4,8% deficit in 2018 was due to the implementation of the Co-op bank decision.
He also stressed that, according to Commission forecasts, the Cypriot economy will have a surplus of 3% of GDP in 2019 and 2.8% of GDP in 2020. The Finance Minister’s letter was sent on May 31, two days after the meeting of the College of Commissioners.