“We will keep whatever made us unique in the first place, and add to that a refreshed, renewed, crisis-proof outlook to correct the mistakes of the past and aim for a dynamic and prosperous future.”

Concrete results have replaced the cautious optimism of late 2014, with Cyprus returning to growth for the first time in four years in both Q1 and Q2 of 2015. How would you assess the progress made in reaching this milestone, and what are your priorities moving forward?

As you know, we have remained fully committed towards the implementation of the macroeconomic adjustment programme. So far we managed to successfully complete seven positive reviews.

The focus of my government is on administrative structural reforms, with the overall aim of setting the foundations for sustainable growth in the long-run, attracting foreign direct investment, and eventually creating a new economic model for the country.

My government’s top economic priority remains the exit from the cycle of recession and a gradual return to capital markets that will allow for the smooth completion of the macroeconomic adjustment programme within the next few months. Cyprus’ economy is slowly but steadily recovering. The long recession seems to have run its course.

The recovery of the Cypriot economy has exceeded expectations. In 2014, due to the resilience of the key sectors of the economy – financial services, tourism, business services – the recession was limited to a 2.3% drop in GDP, as opposed to the 4.8% drop forecasted by the institutions in February 2014. In the second quarter of 2015, the Cypriot economy recorded growth for a second consecutive quarter. More specifically, the economy grew in the second quarter by 0.8%, over the corresponding quarter of 2014, compared to 0.1% in the first quarter of 2015. This is the first time that the economy grew since the second quarter of 2011, and it is indeed a significant development that confirms the positive prospects of the Cyprus economy.

These positive developments have led to successive upgrades of our sovereign rating by different ratings agencies, and helped Cyprus once again access international capital markets as early as 2014, and for a second time in 2015. In addition, since July 2015 we have participated in the Quantitative Easing Programme of the European Central Bank. Long-term yields of Cypriot bonds exhibited a significant decrease during the first months of the year as the market reacted to the quantitative easing decision by the ECB, and the better than expected results of our economy in 2014, while they showed stability during the months of June and July despite the general uncertainty that existed in periphery markets due to the situation in Greece. Yields in the reference period dropped below 4% for the first time since 2011. These signals rather confirm the full re-establishment of confidence towards Cyprus in the international investor community.

 

With the series of IMF reviews having recently been completed, Cyprus has been widely commended for its commitment to the programme and for its sound fiscal management. The implementation of the reforms, and maintaining the pace of them are key concerns for investors and the ‘Troika’. Is Cyprus on track to deliver significant improvements to its competitiveness?

Our emphasis is currently placed on advancing our structural reform agenda, notably on tax administration, the management of fiscal risks and public administration reform. Critical growth-enhancing reforms, including the public administration reform and a privatizations’ roadmap, have already been initiated.

My government’s top economic priority remains to consolidate growth and the gradual return to capital markets that will allow for the smooth completion of the macroeconomic adjustment programme within the next few months.

Structural reforms in conjunction with promising prospects in services as well as in the energy sector, specifically hydrocarbons, are expected to contribute to growth over the medium-term. In addition, it’s expected that the effective and successful implementation of the above will contribute to the enhancement of Cyprus’s competitiveness.

 

Your government is undertaking a major overhaul of the civil service, a crucial aspect in the drive to increasing the ease of doing business. How are these reforms progressing?

The focus of my government is on administrative structural reforms with the overall aim of setting the foundations for sustainable growth in the long run, attracting foreign direct investment and eventually creating a new economic model for the country. Our reform for growth is a strategy with many aspects, and it is progressing well. Having maintained a stable and investment-friendly tax regime, the Government is developing a comprehensive growth reform strategy, limiting bureaucracy, simplifying procedures and creating a friendlier business and investment environment.

My Government’s objective is to boost the country’s international competitiveness, confirming its reputation as a centre of excellence for international investment and business activity. Furthermore, our aim is to make Cyprus one of the most competitive places globally to start and grow a business.

 

FDI will play a critical role in the country’s economic recovery. What is being done to restore confidence in Cyprus as an investment destination?

The message for new investors and businessmen considering Cyprus as a business destination is the following: my government means business. We will take all the measures necessary to restructure and reform, we will cut red tape, we will make Cyprus a new investment destination. We will keep whatever made us unique in the first place, and add to that a refreshed, renewed, crisis-proof outlook to correct the mistakes of the past and aim for a dynamic and prosperous future.

In the past 18 months, experienced foreign investors have participated with significant funds and have taken substantial positions in several banks in Cyprus. The recent restructuring work and reforms made in the banking sector and the wider economy are already delivering promising results.

The Foreclosure Law and the Insolvency Framework, both of which are important for addressing the non-performing loans issue, have been enacted by the House of Representatives in April 2015, and are being implemented. All in all, the banking sector is coming out of this difficult juncture in a strong and healthier condition.

Lastly, there are a multitude of factors that make Cyprus a prime investment destination. We have a strategic location, at the crossroads of Europe, Asia and Africa, which allows us to offer businesses a platform for their operations and preferential access to European markets. We have a well-developed, business friendly infrastructure, and a fully EU harmonised tax and legal system, which, when coupled with our highly qualified and professional workforce, especially in the financial services field, and an ease of doing business, truly makes us one of the most attractive locations in Europe.

Cyprus has one of the lowest, most comprehensive and attractive tax systems with more than 50 double tax treaties in force, an enviable quality of life, and is a perfect environment to raise a family thanks to the safety standards, good weather, and international schools, not to mention the Cypriot hospitality and friendliness. In addition, new vistas for business are opening up: the recent discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone creates interesting prospects for investments and cooperation in the energy sector and auxiliary services, presenting new opportunities for growth in the well-established legal, financial services and even construction sectors.

Furthermore, additional business and foreign investment-friendly measures announced by the government, in the hope of positively supplementing efforts to increase Cyprus’ competitiveness and create a more effective business environment, include tax incentives for existing or new companies doing business in Cyprus, and fast-tracking of permits for large projects.

 

Reunification has the potential to further unlock Cyprus’ economic prospects. What are your aims and hopes for a solution?

I believe that the time is right, and I believe that it has already been too long without a solution of the Cyprus problem. The passage of time is detrimental to reunification.

I strongly believe that the new negotiating process we have entered this past spring is on the right track. What we aim to achieve the soonest possible is a comprehensive, viable and fair settlement of the Cyprus problem, based on a bi-communal, bi-zonal federation with political equality, as set out in the relevant Security Council Resolutions, the High Level Agreements and the Joint Declaration of February 2014, with a single international legal personality, a single sovereignty and a single citizenship. Furthermore, we need to safeguard for Cyprus and all Cypriots the principles upon which the European Union is founded.

The assumption of the leadership of the Turkish Cypriot community by Mustafa Akinci is in this respect a very welcome development. I have already met many times with Mr. Akinci, and our meetings have been both positive and forward-looking. Mr. Akinci and I share the same vision: to reunite our homeland under a bi-zonal bi-communal federation. I believe that together we can cooperate towards that end and bring peace to our homeland.