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EU confident Cyprus will overcome euro crisis

AFP | Last Updated: Tuesday, October 15, 2013 - 17:49

Nicosia: Cyprus is on the road to recovery from its bailout crisis, the European Council president said Tuesday during a first top-level EU visit since the island`s near economic meltdown.

"I have no illusions about the uncertainty, fear and anger felt by many, who either lost or fear losing their jobs," Herman Van Rompuy told reporters after talks with Cypriot President Nicos Anastasiades.

"Yet when I see the sense of dignity and perseverance, the sheer determination of the people of Cyprus, I am confident that Cyprus will overcome the crisis," he added.

In March, Cyprus agreed a painful 10 billion euro (USD 13.3 billion) rescue package negotiated with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and oversized banking system.

The harsh deal with the "troika" also involved the closure of the island`s second-largest bank, Laiki, and a 47.5 percent "hair cut" on deposits above 100,000 euros at biggest lender Bank of Cyprus.

The unparallelled eurozone "haircut" on deposits forced the government to close all the island`s banks for nearly two weeks in March and impose draconian controls when they reopened.

Van Rompuy said for Cyprus to recover from the bailout shock Cypriot authorities must go head with structural reforms in the banking and public sectors to create lasting growth, prosperity and jobs.

"The reforms that you are ambitiously undertaking will pay off. You are not alone in your titanic efforts towards recovery...all the countries in the European Union are by your side."

Cyprus has already passed its first review under the troika of international lenders and officials are expected back in Nicosia this month to undergo a second inspection.

But Cypriots have had to endure tough austerity measures which have seen wages slashed in the private and public sectors while consumer taxes have also increased such as VAT.

"As in Cyprus, all European countries have to work on lasting solutions for growth and jobs. And we will succeed," said Van Rompuy

"Just as we Europeans did in overcoming an existential threat to the euro, which is now behind us, we weathered the storm as Cyprus will do."

Cyprus says it is fully committed to honouring the bailout terms despite their harshness on bank depositors and an enforced regime of the eurozone`s only capital controls.

"I made clear that the government, as it has already demonstrated, is wholly devoted to implementing with determination and without any delays the Memorandum of Understanding agreed with the troika," said Anastasiades.

Government budget projections see the economy shrinking at a slower 3.9 percent of GDP in 2014 from an expected 8.7 percent contraction this year.

International lenders do not expect Cyprus - suffering record 17 percent unemployment and a credit squeeze -- to exit recession until 2016.

First Published: Tuesday, October 15, 2013 - 17:49
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