InsiderEconomyCyprus all set to counter coronavirus-sparked economic crisis

Cyprus all set to counter coronavirus-sparked economic crisis

Cyprus has already introduced three packages of measures aiming to counter the coronavirus-sparked economic consequences on businesses and employees, Phileleftheros reports.

The first package came from the government in the form of fiscal and other relaxations. The second concerns Central Bank of Cyprus decisions in cooperation with the European Central Bank aiming to support households and businesses to counter the pandemic’s consequences. And the third one is linked with decisions taken by the  Eurogroup last week.

Phileleftheros has summed up Cyprus’ firepower against the lockdown’s economic impact. To begin with, Finance Minister Constantinos Petrides has said the support Cyprus will receive from the Eurogroup is within fiscal easing through which the government is promoting €200 billion of state guarantee loans.

As well as in the pumping of €400 million of funds for small and medium-sized enterprises by the European Investment Band and an additional €160 million from SURE fund towards employees.

The second measure, which concerns €200 billion in European Investment Bank (EIB) loans, the Minister explained that this is corporate lending – that is an agreement between the EIB and member state banks – with government providing guarantees.

The third measure concerns the €100 billion SURE fund proposed by the European Commission, with guarantees again granted from the governments of member states.

Cyprus has set €38 million towards guarantees so as to raise €160 million from this fund, to be allocated to income and salary support programs that have been already announced, the Minister also said.

European Central Bank decisions have favoured the island’s banking system and consequently its households and businesses. The first package of measures has been immediately implemented and includes additional long-term refinancing actions to directly boost liquidity. As well as more favourable terms for bank loans. The main goal is providing support to businesses already severely affected.

The ECB’s decision to temporarily ease supervisory requirements, sparked by the serious turmoil in the global economy due to the coronavirus epidemic, benefits Cypriot banks by €1.4 billion.

The Central Bank of Cyprus last week announced an additional measure in a bid to further support businesses and households in tackling the financial impact caused by the pandemic and ensuring the financial system’s stability.

Specifically, it decided to extend for 12 months the timetable for the gradual introduction of the capital reserve O-SII that must be observed by Cyprus’ other systemic major credit institutions, releasing additional funds of about €90 million as from January 1, 2021.

The release of the above funds can be used by credit institutions to absorb potential losses and to fund a number of households and businesses. The additional funding could be close to €400 million.

This is a decision taken weeks ago but could not be announced before the green light from Frankfurt had come. The important systemic credit institutions O-SII of Cyprus are Bank of Cyprus, Hellenic Bank, RCB Bank, Eurobank (Cyprus), Alpha Bank (Cyprus) and AstroBank.

In addition, ECB bond purchases of € 750 billion started at the end of March through the Extraordinary Pandemic Bonds Purchase Program (PEPP).

On the domestic front, with their expansion till June 12 the fiscal measures account for almost €850 million, or about 3.5% of GDP. It concerns direct government support to businesses and the self-employed to help them weather the coronavirus consequences.

This amount is expected to exceed €1 billion in total if additional support measures for employees are announced for the period after June 12 and lasting for another four months.

By Theano Theiopoulou


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