This is the only Koumoundouros comment on the interview that follows

By Jonathan Stearns 8 March 2016

(Bloomberg) — The benefits for Cyprus of the European Central Bank’s bond-buying program were too insignificant to justify remaining in an international-aid program, says Finance Minister Harris Georgiades.

  • A day after the Cypriot government exited a three-year-old bailout and as it seeks investment-grade status that would make the country eligible again for ECB quantitative easing, Georgiades says QE wasn’t extensively applied in Cyprus in 2015
  • “It was active for two weeks last July and then again for two weeks last October — that’s it,” he tells reporters in Brussels
  • This resulted from the ECB’s practice of refraining from applying QE whenever Cyprus was negotiating further loan disbursements with its international creditors under a process of reviews that lasted about three months each and basically happened “back-to-back,” according to Georgiades
  • “Being in a program or not doesn’t really make too much of a difference — at least not in our case,” he says, adding that when it comes to QE in Cyprus “the broader benefits are probably more important than the direct impact on our yields”
  • The Cypriot government is keen to win investment-grade status, says Georgiades
  • We acknowledge that we need the investment-grade rating, not only to reactivate the QE but primarily because that would drive the cost of borrowing even lower,” he says
  • The government’s commitment to fiscal discipline and to policies that encourage economic growth will bring ratings upgrades, according to Georgiades
  • We are quite confident, even though I wouldn’t really comment or offer guidance to the rating agencies, that through the continuation of these policies the upgrades will continue,” he says
  • Georgiades says the Cypriot banking industry is tackling its 47%-48% ratio of non-performing loans and will be bolstered in this effort by a new foreclosures law, an insolvency framework, a banking-mediation service and stronger economic growth
  • “We do expect that this will start coming down later on in the year,” he says
  • The possible reunification of Cyprus, divided since 1974 when Turkey invaded and occupied the northern part of the island in response to a coup aimed at making the country part of Greece, would be an economic boon, according to Georgiades
  • “The outlook would be very positive, not only for Cyprus but also for the region; it would open up huge opportunities for economic and commercial exchange,” he says
  • Georgiades says the government has refrained from factoring into current policies the potential future economic benefits of any reunification
  • “Before it happens and before it’s certain, we do not want to make any assumptions,” he says
  • Overall, Cyprus’s exit from its aid program without a safety net and with the blessing of its euro-area partners and the International Monetary Fund is proof that such rescues requiring budget austerity and economic overhauls work, according to Georgiades
  • “We entered the program being in a recession and we are exiting with the economy back on growth,” he says
  • “We have exited the program in a much better condition than we got in; and that’s not only on the fiscal issues,” Georgiades says, adding that “the real economy has recovered whilst being in a program”


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