At the time of the 2012-2013 financial crisis, few could have predicted that three years later, Cyprus would be out of the woods, writes Nikos Chistodoulides in an exclusive op-ed for euractiv.com
Nikos Christodoulides is Government Spokesman of the Republic of Cyprus. He has been a member of the Diplomatic Service since 1999. A familiar face in Brussels, during the Cyprus Presidency of the Council of the European Union (2012), Christodoulides was the Presidency Spokesman in Brussels.
Overcoming an unprecedented financial crisis, Cyprus has recovered impressively following a three year period of robust reform, bank restructuring and fiscal consolidation.
Following the unprecedented March 2013 decision to use the “bail-in” instrument for the first time as a remedy to the banking crisis, very few could had predicted that three years later, Cyprus would register economic growth of 1.6%, a nearly balanced budget with a primary surplus of around 2.5%, a steadily reducing public debt, and a well-capitalised banking sector, and that the country would not be requesting an extension of the support programme.
In fact, Cyprus is now referred to as a role model of economic reform and consolidation. Key to this success is the fact that Cyprus managed to successfully turn the crisis into an opportunity to effectively address and correct long-term weaknesses, and to build a strong economy anchored on solid foundations.
This was done not by increasing taxes, but rather by cutting public spending, freezing new hiring in the public sector and rationalising welfare spending through completely reforming the welfare system.
A policy of privatisation and licensing encompasses the ports, an integrated casino resort, new marinas, the national lottery and partially the telecoms sector. The banking sector has been transformed through restructuring, resulting in a smaller yet much healthier banking sector, which operates under stricter supervision and oversight.
With strong recapitalisation, achieved mainly through significant foreign investment, and with new management in most of the Cypriot banks, it is fair to say that the Cypriot banking system has turned the page.
Equally significant, if not more so, is the strategic reorientation of the business and financial services sector, which no longer relies on an oversized banking sector, nor on notably high foreign deposits. Notwithstanding the leaps of progress, it is certainly acknowledged that challenges remain, such as high unemployment and non-performing loans.
As Cyprus decisively continues to reform and restructure, we are confident that we will overcome the remaining challenges.
In the last three years, Cyprus has proven that it has learned from past mistakes, that its economy and its people are resilient, that it has the commitment and the capability to build and sustain a stable economy and to be a credible member of the EU and the eurozone.
The results of this effort have undoubtedly been a product of close cooperation between the government, political parties, social partners and above all the Cypriot people. This collective effort will continue. The completion of the aid programme is therefore not the end of the road for Cyprus, but signifies the continuation of our plans, with a strong emphasis on sustainable reforms.