Europe Will Come out Stronger from Crisis - Christofias

Europe will come out stronger from economic crisis if the Community's method of tackling it methodically and effectively is followed, said President Demetris Christofias in a speech to mark the visit of the Conference of Presidents in Nicosia.

Martin Schulz, who will be President of the European Parliament during Cyprus' EU Council presidency, will also return to Cyprus for the inauguration at Curium Amphitheatre on July 5th, said Christofias.

The president repeated his position that austerity measures are resulting in deeper recessions in countries like Greece and Cyprus.

"We can and we must give back hope again to the European citizens...A younger generation that is watching today its future being lost," said Christofias.

Cyprus' priorities will be 'Towards A Better Europe' that is more efficient and sustainable, with a better performing and growth-based economy, that is more relevant to its citizens with solidarity and social cohesion and that is more open to the world and closer to its neighbors, he said.

Economic struggle

Cyprus is going through its own economic struggle, with new austerity measures expected to be announced soon by the finance ministry. The government blames the banking sector's exposure to Greek debt, however, the problem started before this in 2007-2008, when the entire surplus inherited by the communist government was spent in what former Central Bank Governor Athanasios Orphanides says was a 'spending party'. Up to a billion euros per year was spent in the last 5 years by the current administration, said Orphanides.

The new Central Bank governor, Panicos Demetriades, has already said that the island will need to ask the European Stability Mechanism for a bailout given the banks' losses. Laiki Bank, which lost 2.5 billion euros on its Greek debt, has already asked for a government bailout to the tune of 1.8 billion euros to recapitalise it in time for ECB stress tests at the end of June.

With all due credit to his speech writer, unlike Christofias' slogan of approaching the crisis effectively and methodically, the government's approach has been haphazard, some critics say ineffective. Forced into austerity measures at the beginning of the year, the communist-led Council of Ministers has seen the finance minister change two times. Charilaos Stavrakis was replaced by Kikis Kazamias, who resigned and was replaced by the current FM Vassos Shiarly. Shiarly was expected to announce his new austerity measures two days ago but so far they have not appeared amid resistance from trade unions to changes in the Cost of Living Allowance (CoLA).

The government's pattern so far has been foot-dragging on cost cutting, and even though the measures taken so far are called 'austerity' here, in fact it is simply trimming the fat. Real austerity measures have not yet been taken even though the island is in a double-dip recession and faces clear challenges in producing GDP at pre-crisis levels.

Earlier this week, the EU Commission said that the island's economy shows serious imbalances. In particular, the island's current account, public finances and the financial sector need close monitoring and urgent economic policy attention to avoid negative effects on the economy and on the wider EU union, said the Commission in its macroeconomic review.

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