Greek Cyprus expects drop below forecasts

ISTANBUL - Radikal

Greek Cyprus’s finance minister said an expected contraction in the island’s economy after this year’s international bailout would be less severe than expected by the country’s lenders.

Speaking to Reuters on Tuesday during a six-hour trip to London, Harris Georgiades said the impact of austerity measures imposed by the European Union as a condition of the bailout was overdone and the country’s banks would not need additional aid.

The rescue by a group of international lenders known as the troika saved Greek Cyprus from bankruptcy and was the first in the euro zone crisis to see the savings of firms and richer individuals seized to prop up damaged banks.

Economy improves

Georgiades said Greek Cyprus’s economy had proved more resilient to the upheaval than expected and had received a small lift from an uptick in the euro zone economy.

“Despite the difficulties and the magnitude of the decisions we have taken, at all levels we are doing much better than expected,” Georgiades said.

This year’s economic contraction “will be 2 percent less than assumed... I think it’s going to be 7 percent,” he said. “Our efforts on the fiscal dimension remain firmly based on very, very conservative assumptions... more conservative than the troika assumptions. We want to be on the safe side.” The troika expects a 3.9 percent economic contraction next year.

Greek Cyprus was close to financial collapse when the 10 billion euro aid deal was agreed in March. It still has capital controls in place to prevent individuals and companies from emptying their accounts.

Georgiades said the government would stick to its current tactic of gradually removing the capital restrictions and promised that, with cash remaining from its rescue deal, there would be no need for further bank aid. “I do not foresee that any of the banks will need more capital,” he said. “Greek Cyprus now has a well-capitalized banking system.”