NICOSIA – Cyprus’ hopes of getting out from under an economic crisis that some analysts said could last for years lies in its small-and-medium-sized enterprises (SME’s) Finance Minister Harris Georgiades said.
The businesses, however, are being pinned down by capital control imposed by the government 10 months ago – they were supposed to be lifted within weeks – and which are limiting their access to liquidity and hurting their ability to operate, critics have said.
Georgiades, acknowledging the difficulty, urged Cypriots to be patient. The government of President Nicos Anastasiades confiscated 47.5 percent of private accounts over 100,000 euros to make depositors pay for bank mistakes that ruined the economy.
That was one of the conditions from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which is putting up 10 billion euros ($13.67 billion) in a bailout. The government had to make cuts or savings of 13 billion euros ($17.76 billion) in return.
“I do not expect that recovery of our economy will come through one or two spectacular moves,” Georgiades said, according to the Cyprus Mai. “It will be gradual,” he added and its backbone will be SMEs operating in the traditional areas that still have prospects – tourism, services, shipping – and new sectors like energy.
He said righting the banks, which nearly went under because of bad loans to Greek businesses that failed and with huge holdings in Greek bonds that were devalued 74 percent, was essential to recovery.
Banks have shown signs of stabilising, with deposit outflows slowing “but we have a long way to go,” he said. A daily limit of 300 euros ($410) was imposed, with slightly better terms for businesses, to prevent a run on the banks. There’s no word on when, or if, they will he lifted.
“The blow to our banking sector was substantial. It will be a long and difficult effort,” Georgiades said.
Cyprus had to agree to close down its second biggest bank, Laiki, and recapitalize Bank of Cyprus – its biggest – by seizing depositors’ cash. Depositors also are forbidden to transfer money to other banks internationally.