Press Releases

Ιt is indeed an honour and a pleasure to address such a distinguished audience.

From the outset, I would like to express my appreciation to the organizers of this event: The Wilfried Martens Centre for European Studies – the official think tank of the European People’s Party – and its local partner, The Glafkos Clerides Institute.

I have no doubt that today’s Forum, which is one of the most prestigious internationally, will provide great insights to the latest developments in European economic policy and the best ways to flexibly adapt in an increasingly evolving and competitive global economic environment.

I believe that before assessing the future economic potential of Cyprus, it is fundamental to provide a short synopsis and comparison of the economic outlook at the peak of the crisis back in 2013 and the current economic data.

a)        In 2013, when my Government assumed Office, we had negative growth rate of around 6%. In 2018 we experienced a growth rate close to 4%, much higher than the EU average, while medium-term prospects for annual growth are in the range of 3%.

b)        In 2013 the country’s Gross Domestic Product was 18.1 billion euros, while in 2018 it had reached 20.7 billion euros.

c)        In 2013, real Gross Domestic Product per capita was 20.600 euros and in 2018 it had climbed to 23.300 euros.

d)        In 2012 and 2013 the Government had budget deficit of 1 billion euros, while 2018 will be the fifth consecutive year with significant primary surpluses.

e)       In 2013 unemployment had reached 16% and in 2018 has drastically fallen to less than 7.5%, with a declining trend.

f)        In 2012, following successive downgrades of the economy by international rating agencies, Cyprus was in the junk category and excluded from international markets. Nowadays, due to our sensible economic management and after successive upgrades, we have returned to the Investment Grade status, sending a strong message to international investors and allowing Cyprus to borrow from markets at very competitive rates.

In fact, last month, we were able to issue, for the first time ever, a fifteen – year bond with an interest rate of 2.75%, clearly showing that macroeconomic stability has been re-established and confidence has been restored.

The above mentioned demonstrate in the most apt manner the impressive economic recovery of Cyprus, which was the result of:

(i)      The prudent fiscal policy which we have been implementing and resulted in high nominal and primary fiscal surpluses, with well targeted expenditure policies, particularly social expenditure.

(ii)      Maintaining a stable and competitive tax and legal regime, fully harmonized with the EU and international best practices, and safeguarding our comparative advantages as an attractive investment destination for International Businesses.

(iii)      Adoption of measures which facilitated economic and investment opportunities, such as corporate tax incentives, broadening the range of permitted land development for large projects, increasing building coefficients, facilitating joint tourist developments and reforms in the legal and tax framework of the maritime sector.

This in turn resulted to substantial investments in a wide range of sectors, from sea-ports, to Marinas, to golf courses, to new hotel, malls and land developments, the largest integrated casino resort in Europe, significant increase in ship registration and ship management, as well as breaking tourism arrival records.

(iv)     Adopting new specific incentives in order to enrich and diversify Cyprus’s economic sectors, such as a tax incentives package for investments to innovative companies, an enhanced investment funds framework, as well as a comprehensive package for the development and promotion of the filming industry.

(v)      Pursuing significant structural reforms, amongst others, as regards the pension, welfare and labour market system, the health care system and in tax administration.

(vi)    Recapitalising the banking system. Cypriot banks are now operating on healthier foundations, in terms of capitalization, liquidity, profitability and with a prudent risk-based approach to lending, even though constant work is still needed to address remaining challenges, such as the level of Non-Performing Loans (NPLs).

Through various measures, both from the Government and the banking sector, the level of NPLs has declined considerably, even though is still high.

In fact, there has been a significant reduction of NPLs from a peak of about 29 billion euros to around 11 billion euros at the end of 2018, which constitutes a decrease of around 60%: The biggest drop recorded in the EU.

(vii)     Enhancing key productive sectors of the economy, in particular tourism and shipping, through the establishment of relevant Deputy Ministries which will enhance their flexibility and competitiveness.

(viii)   Other significant sectors are also exhibiting strong economic activity, such as higher education, research and innovation and energy. Over the last few years there has been considerable investment in private and public universities and research facilities, while a series of tax incentives are also provided for the growing start-up industry.

Investment in renewable energy is also on an upward path, while new offshore natural gas findings add a new dimension to the prospects of the Cyprus economy and our vision of transforming the Eastern Mediterranean to an energy hub that would contribute to the region’s stability and to the energy security of Europe.

I feel obliged to praise the patience, hard work and resilience that the people of Cyprus demonstrated, as well as the co-operative stance of the majority of the political partners, the social partners, the professional organisations and the private sector, which contributed to our country being labeled by international organizations and institutions as a “success story”.

And I wish to remind that back in 2013 some claimed that Cyprus would need a second or third Memorandum with Troika or others advocated for Cyprus to exit the euro zone.

Even though Cyprus has yet to reach its full potential in terms of economic growth, I strongly believe that, we are on the right track.

Our plan is to remain focused on maintaining and broadening the conditions under which surpluses and high growth rates can be generated, to continue promoting structural reforms and improving the country’s business environment.

This goal is achievable, but under key pre-conditions, such as maintaining macroeconomic stability, the orderly functioning of the financial system, preserving the competitive environment for entrepreneurship and investment and improving competitiveness through a continuous reform effort.

This is the economic philosophy of our political family in the European Union, the European People’s Party, and this is exactly where the EU could have a role. Already the challenges to world trade highlight the relevance of the EU which is, first and foremost, a formidable trading block.

In order to fully utilize its competitive advantages, the EU must promote policies which will allow its economies to compete on a global scale, and definitely not policies which create unnecessary burden for our economies.

We need policy initiatives that support entrepreneurship and investment, which offer breathing space and flexibility and not policies which erode competitive advantages our economies may enjoy.

Cyprus’ policy goals and reforms are undertaken under the European policy framework and rules. In this context, we support initiatives such as on banking, capital markets and tax transparency and cooperation, but at the same time we remain firm in our position that certain policies including in the area of taxation, should remain a sovereign responsibility.

In the context, we are determined to maintain our compliance with the common fiscal rules. As a country which in the recent past has paid the price of a careless management in public finances, we recognize that sustainable public finance management is a requirement for macroeconomic stability and growth. We therefore remain committed to maintaining a policy of a balanced budget.

Another European priority is the digital transformation, which we fully adhere to. Digital Transformation, with an emphasis on e-Government, is a key policy objective for this Government and many initiatives have been set in motion, which will actually improve the productive capacity of the public service.

In addition, to the anticipated establishment of a Deputy Ministry of Research, Innovation and Digital Transformation and the full digitalization of the Tax Department, which will enhance the ability to monitor and provide quality of service to the tax payers, of equal importance are the introduction of:

●       An e-justice system that will digitize the functioning of the courts,

●       An e-health system for the provision of high-end health care services for the public,

●       Electronic signature and electronic identification, and

●       The implementation of an Enterprise Resource Planning system enabling the introduction of best practices in public financial management.

The Government's ambitious reform efforts, amongst others, also include:

-         The reform of the whole judiciary system, with the aim of making the system more effective and speedier.

-         Effective implementation of a National Heath Scheme and ensuring its financial viability.

-         The implementation of the Tourism Strategy by the Deputy Ministry of Tourism.

-         The establishment of a new Independent Supervisory Authority for the Insurance and Provident Funds with the aim of strengthening regulation and supervision.

-         The adoption of the new legislative framework for the management of the Investment Funds, which opens up new avenues for the services sector.

-         Improving governance in the field of research and innovation. In this regard, the newly established bodies of Chief Scientist and National Research and Innovation Council are key in distributing innovation in business.

-         Local Government reform in a way that safeguards the provision of quality of services to their constituents at affordable rates.

-         Implementing a National Strategy for Decentralised Ledger Technology also known as Blockchain Technology.

-         Reform of the governance structure of the Central Bank.

-         Educational reform, covering all issues related to learning outcomes, assessments and technical and vocational training. 

What I would like to assure is that we are ready to adapt or adopt, in consultation with the Parliament, any reforms that might be deemed necessary in order to enhance our competitiveness, and in particular all essential reforms in order for the Public Service to become more efficient and flexible, in accordance with the best practices of other EU member states.

In concluding, I would like to once more extend my deepest appreciation to the organisers of the Forum and to all of you, for your ongoing trust, positive contribution and strong support.

Thank you for contributing to our efforts which are efforts of the EU itself.

(RM/AH/SCH)