Cyprus should utilize EU pandemic funds to promote reforms that would diversify its economy, European Stability Mechanism General Director Klaus Regling told the Economist 16th Cyprus Summit.
“Cyprus will receive a substantial amount of money from the EU funds. This money presents Cyprus with a good opportunity to continue its structural reform effort,” Regling also said during the conference that took place virtually on Tuesday.
Referring to Cyprus’ fiscal support package to alleviate the impact of the pandemic to the economy, Regling said the package would protect employment and economic activity.
But, he added, every EU member-state needs to recognize that these immediate measures should be accompanied by measures that would support the economy in the long-term.
“Cyprus is an open economy, exposed to a number of external risks,” he said before referring to the tourism sector which has contracted by an annual 85% so far due to the pandemic.
“Cyprus would make its economy more resilient by decreasing its dependence on tourism and diversifying further into other areas,” the ESM chief also said.
Regling referred to the high level of non-performing loans in the Cyprus banking sector, describing them as a “particular challenge” and noting that new flow of NPLs due to the recession associated with the pandemic would come on top of the already high NPL rate.
He also referred to economic reforms on the EU level, noting that additional steps would make the Economic Monetary Union more resilient, such as the ESM reform, the completion of the capital markets union and the banking union.