FinMin defends Cyprus’ economic policy ahead of a Eurogroup meeting

Cyprus Minister of Finance Harris Georgiades has reiterated that the government will not take any fiscal measures that would undermine the economy`s growth prospects, despite the European Commission`s view that Cyprus should implement measures to comply with the Stability and Growth Pact targets concerning the structural balance in 2017.

Georgiades told CNA that “the Commission`s view is not based on the real performance and projections of the economy but on a false approach based on the view that the economy has entered an overheating phase and we should take measures, such as imposing new taxes, to contain economy`s growth prospects.”

In their meeting in Brussels on Monday, the euro area Finance Ministers will discuss the government Draft Budgetary Plans for 2017 in combination with the Commission`s winter forecasts. The meeting is expected to repeat the well-known recommendations to correct a deviation from the medium-term objectives concerning the structural balance for Cyprus, Italy, Slovenia and Finland.

Cyprus disagrees with the Commission`s position, citing “a methodology that entails counter-intuitive results”. The Commission believes that for 2017 Cyprus structural balance will turn into a deficit of 1.9% of GDP, pointing to a risk of a “significant deviation from the requirement for balanced budget in structural terms.” The Finance Ministry maintains that the structural deficit will reach 1.0%.

“From the government’s standpoint it is clear there is disagreement over this issue and we will not follow such wrongful recommendation,” Georgiades said.

The Finance Minister also made clear “we will safeguard the main approach of our policy which is focused on strengthening and guarding growth and concurrently maintaining a balanced budget”.

source: CNA