Insider Economy Additional support measures to boost the coronavirus-hit economy

Additional support measures to boost the coronavirus-hit economy

The government is putting together additional effective support measures so as to boost the liquidity of business in Cyprus, Phileleftheros reports.

The additional measure will be based on the recently-adopted German model and constitute a safety net ensuring the continued operation of businesses and jobs.

The new package aims to stimulate the liquidity of small and medium-sized enterprises through guaranteed loans or interest subsidies.

At the same time, the framework for flexible work could be diversified as well as make tax arrangements more favourable so that businesses liquidity is not further burdened.

Finance Minister Constantinos Petrides is set to consult with banks which must take advantage of the European Central Bank’s support framework. The government is also expected to put pressure on financial institutions to suspend instalments, interest and charges for a specified period of time.

As a matter of fact, banks should take measures in consultation with the Central Bank of Cyprus and the European Central Bank so that their capital adequacy is not affected.

A number of proposals were submitted at Thursday’s meeting between party leaders and cabinet members – chaired by President Nicos Anastasiades.

Petrides and Labour Minister Zeta Emilianidou said they would consider party proposals with the aim of integrating them into government bills that have already been forwarded to parliament but also into those that will follow.So far, five of a total of 18 government measures have been sent to Parliament.

And early next week the finance and labor ministries will send the revised bills and new package of measures to the parties for approval. These should be approved by the House plenum on Tuesday or Wednesday the latest.

Insiders said that, at the request of the majority of parties, the government will withdraw the bill providing to lower the standard VAT rate from 19% to 17% over a two-month period. And that providing for the reduced VAT rate from 9% to 7%.

There seems to be a consensus among parties on this, so that the corresponding amount will be earmarked for further support for employees, self-employed and small and medium-sized enterprises. Parties and government have concluded that changing VAT rates from business systems brings additional costs to businesses.

Another measure expected to be incorporated into the bills following a joint call by parties is rent arrangements. Specifically, in addition to banks suspending installments, renters will also be provided with facilities. This will make it easier for both homeowners and renters.

Some parties also demand a suspension of rents, however, this seems impossible to be implemented since there are legal hurdles preventing the state from doing so. But what the state could do is freeze the rent law passed a few weeks ago. Substantially, by freezing this law express evictions cannot take place.

This will be a temporary arrangement.In addition, there seems to be a consensus paving the way for the state to borrow money so as to have an additional liquidity cushion. This will come either from the markets or through domestic borrowing. Borrowing from the markets is impossible right now since there is no interest.

It may be easier in a few months – after the purchase of the Cyprus bonds by the European Central Bank.Opposition parties have also called for a suspension of foreclosures beyond the three months’ time-period already announced by banks. In addition, they demand that the suspension be extended to creditors.

The parties suggested that foreclosures are suspended through legislation, but the government does not accept this, warning that there will be strong reaction from the banks.

By Eleftheria Paizanou

 

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