Cyprus President Outlines Plan to Rebuild Economy After Bailout
Cypriot President Nicos Anastasiades announced a range of tax breaks and subsidies to boost investment and save jobs after the country’s banking sector was torn apart by a financial rescue that imposed losses on depositors.
The government will offer tax breaks of as much as 25 percent for companies hiring new employees for at least one year and create a fund to manage state assets, Anastasiades said today in comments broadcast live on state-run CyBC TV. The package also includes plans to create casinos and the lifting of some building regulations to draw investment in resorts and golf courses.
“There is no doubt that trials and tribulations await us,” Anastasiades said. “For us to succeed in kick-starting the economy and to emerge from this crisis as soon as possible, we must strictly adhere to all the commitments we have undertaken in this loan accord.”
Anastasiades agreed on March 25 to a 10 billion-euro ($13 billion) loan from the euro area and the International Monetary Fund in return for measures including a tax on bank deposits of more than 100,000 euros at the country’s two biggest banks as well as wage and pension cuts and the sale of assets and gold. Those concessions were demanded by creditors in a bid to rapidly shrink what European and IMF officials called an oversized and unsustainable banking sector.
Finance Minister Haris Georgiades this week declined to give a forecast for how much the economy will shrink this year in the wake of the accord, which includes the closing of the nation’s second-biggest bank. The government has imposed restrictions on capital movement, the first time these have been imposed in a euro-area country, to prevent an outflow of deposits after the tax.
The country’s rescue program includes a forecast for gross domestic product to decline 8.7 percent this year, compared with a European Commission projection for a 3.5 percent contraction before the Cypriot bailout was agreed.
Government spokesman Christos Stylianides said on April 4 that GDP could fall by as much as 13 percent this year. That would be the biggest slump among euro area countries, according to the IMF’s World Economic Outlook forecasts released on April 16. The IMF didn’t provide figures for Cyprus.
Anastasiades, elected on Feb. 24, also said his government would detail measures to shore up the shattered financial services industry in a new package of measures due by the end of next month.
He also announced plans to step up the creation of solar energy parks and subsidies for solar energy installation, a plan that will save 51 million euros a year and create 650 jobs. The government will also build a liquefied natural gas plant on the island to take advantage of expected proceeds from gas exploration, he said.