Cyprus faces opportunities but also risks, FinMin says

Cyprus faces opportunities but also risks, FinMin says

Cyprus Minister of Finance Harris Georgiades warned on Friday that Cyprus through the implementation of its adjustment programme could exploit opportunities but should shield itself from potential risks.

His comments came at the conclusion of an informal review carried out by the island`s lenders as the Cypriot programme is off track due to the parliament`s decision to suspend of the effective application of the foreclosure framework, a key prerequisite for the completion of the fifth review.

“The current period presents opportunities which should be utilised such as the ECB quantitative easing programme but we should be protected from potential risks,” he added. As Cyprus` bonds are below the investment grade, Cypriot bonds can be included in the ECB`s QE only if the country acquires positive reviews.

Georgiades noted that the Cypriot economy embarked on a correction course, adding that the programme implementation has not lead the economy in a deep recession.

“We still have a long way to go but we should understand that if a country were to survive financially it should have access to the international markets or at least to a support programme,” we went on to say.

A government source voiced concerns that a prolonged non-compliance with the programme terms could cause similar consequences for the Cypriot banking system as the case of Greece. Following a stand-off between the new Greek government with the EU and the IMF over its programme, the ECB announced it will not accept Greek bonds as collateral for funding Greek banks through the ECB monetary operations and earmarked €60 billion of emergency liquidity assistance which is granted by the Greek National Bank.

The same sources noted that there is no such issue for the time being but did not exclude a reaction by the ECB in case of a protracted stalemate.

With regard to the insolvency framework, the same sources said that the lenders presented an interesting proposal on the fifth and most crucial bill regarding personal insolvency but there still some issues to be further discussed concerning eligibility, mutually agreed restructuring and the treatment of the guarantors.