Insider Business Government deficit increases as a result of CCB sale

Government deficit increases as a result of CCB sale

The government registered a deficit of €1.050b  in the third quarter of 2018 after the Statistical Service, in coordination with Eurostat, classified the two entities created after the closure of the Cooperative Bank (CCB) within the General Government sector.

The €1.050.0 b deficit  quarter of 2018 compares to a surplus of € 366.7 million in the corresponding period of the previous year, based on the preliminary data of the General Government`s financial accounts. Total revenues amounted to €2.1636 b and total expenses to €3.2136 b.

The main categories of revenue for the period July-September 2018 were: taxes on production and imports €854.7 m (11.1% increase as compared to the third quarter of 2017), of which net VAT was €535.3 m (14.6% increase), taxes on income and wealth €632.5 m (0.4% increase), and social contributions €444.9 m (10.3% increase). Revenue from the sale of goods and services reached €152.9 m registering an increase of 9.3% as compared to the corresponding period of the previous year.

The capital account recorded an expenditure of €1.5957 b (€715.2 n investment and €880.5 m capital transfers) as compared to €98.4 m during the corresponding period of 2017 (€91.6 m investment and €6.8 m capital transfers).

The remaining categories of expenditure for the period July-September 2018 were: social transfers €605.6 m (3.7% increase compared to the corresponding period of 2017), and compensation of employees (including imputed social contributions and pensions of civil servants) €572.5 m (5.0% increase). Intermediate consumption reached €174.7 m (15.8% increase as compared to the corresponding period of the previous year).

A negative investment of €710 m

According to the Statistical Service, the sale process of parts of the assets and liabilities of the Cyprus Cooperative Bank Ltd (CCB) to Hellenic Bank resulted in the establishment of two new entities, namely the Cooperative Asset Management Company Ltd (SEDIPES) and Cyprus Asset Management Company Ltd (KEDIPES), which received assets with a book value of €8.34 b in return of a liability of €3.54 b. Upon examination of the sale process details and taking into consideration the legal status of the new entities, the Statistical Service has classified both entities within the General Government sector.

The fiscal burden of €1.5 b in the revised fiscal accounts of the third quarter that resulted from the above transaction is analysed as follows:

Non-performing loans (NPLs) of nominal value amounting to €6.97 b are an asset of the new entities. The real economic value of these NPLs has been estimated by CYSTAT to be 20.94% of the nominal value, i.e. decreased by 79.06%.

Therefore, the estimated real economic value of the NPLs received by the new entities is valued at €1.46 b. According to this valuation, a negative investment of €710 m is observed and recorded in fiscal accounts, which is the result of the acquisition value (€2.17 b) minus the real economic value of NPLs (€2.17 b – €1.46 b = €710 m).

Further to this negative investment, an expenditure of €625 m, which corresponds to the share of the collateral received from the former CCB and concerns its fixed assets, is recorded as investment. This investment increases the capital assets and hence the net worth of the General Government by the same amount.

Finally, CyStat also recorded as expenditure the guarantee of €155 m (contingent liability) received by Hellenic Bank.

(Cyprus News Agency)

Top Stories

Twice as many tests in Cyprus than UK per 100k population, 10x that of Holland – report

According to data from the latest report by the Health Ministry's Epidemiological Surveillance Unit, as of June 2, Cyprus has performed 13,734 tests per...

No new Covid-19 cases in Cyprus on Thursday

No new coronavirus cases were reported in Cyprus on Thursday after 1996 tests, in what Health Ministry experts described as "a brilliant result" at...

EU considers broadening scrutiny of foreign investments

The European Union's executive has proposed broadening scrutiny of foreign investments in the bloc, according to a public draft document, part of efforts to...

Wedding industry pleads for rethink on gathering restrictions

The government's decision yesterday to entirely lift the ban on gatherings on September 1 has taken the wedding industry by surprise, with a group...

Fiscal Council urges caution with public funds

    The government should be cautious in channeling public funds until there is clarity concerning the development of the crisis caused by the coronavirus outbreak, ...


Poulles (Υoung kolokassi)

Either you thrash the coriander seeds in a mortar, without making them into dust, or you gradually crush them in a blender. Remove the edges...

Pork cooked in wine

Crush the coriander seeds in a pestle and mortar or pulse-blend in a blender, taking care not to over-grind. Put the meat in bowl (not...

Lefkaritikos tavas – O ‘protinos’

Wash and dry the meat and rice separately. In a ‘tava’ (oven proof deep clay pot) first put a layer of five-six pieces of meat...

Local cuisine: An introduction

Rich in fresh ingredients and tasty herbs, offers the very best of Mediterranean culinary delights. Head out to a tavern and feast on a...