ECONOMY

Cyprus wins ECB chief praise on road to renewed growth

Bailed-out Cyprus will return to growth in 2015 following a three-year recession, a survey showed Thursday, after the island won praise from European Central Bank chief Mario Draghi.

An economic review by the small EU member’s second largest bank, Hellenic, said Cyprus could be on course for marginal 0.5 percent GDP growth from a decline of 2.3 percent in 2014.

It tempered this by saying growth could be derailed by slow structural reforms and a struggling Russian economy.

The report was published soon after Draghi, in Nicosia for an ECB meeting, said Cyprus had shown remarkable strength in toughing out a painful bailout deal.

“We know the Cyprus people have made considerable sacrifices,” he said at a dinner in his honour on Wednesday night.

“It is therefore encouraging to see that there are signs of stabilisation and recovery on the horizon,” said Draghi.

“The programme has been yielding very concrete results, in fact even better results than were forecast two years ago.”

“Indeed it is remarkable that Cyprus is on track to exit the excessive deficit procedure two years ahead of the 2016 deadline,” said the ECB chief.

“All these achievements are impressive and command respect from the rest of Europe.”

the financial sector still faced major challenges such as speeding up the reduction of banks’ non-performing loans that accounted for over half of all loans.

On Wednesday, around 4,000 demonstrators protested outside a Nicosia conference centre where the ECB Council was meeting, calling for an end to the harsh austerity policies they say have driven many to unemployment and on the poverty line.

Under the slogan of “save the people, not only profits and banks”, they called for more spending on job creation rather than slashing social welfare and benefits.

In March 2013, Cyprus clinched a 10-billion-euro ($13 billion at the time) loan from the European Union and International Monetary Fund to bail out its troubled economy and oversized banking system.

Under the terms of the deal, the government was required to close the island’s second-largest bank, Laiki, and impose a 47.5 percent haircut on deposits above 100,000 euros at the Bank of Cyprus.

The bank, the island’s biggest lender, has since undergone major restructuring, which included absorbing the good assets of the former Laiki Bank.

Austerity measures have also led to tax hikes, salary cuts and social welfare benefits slashed.

And the Mediterranean holiday island recorded a 2.8 percent drop in tourism revenue in 2014, the first decline since 2009, official data showed last week. [AFP]