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Presentation by the President of the Republic, Mr Nicos Anastasiades, of the First Government measures to restart the economy


Ladies and gentlemen,

On 25 March a long period of instability, uncertainty and catastrophic inaction came to an end. I will not repeat what I mentioned in my address to the people. Besides, everything that is publicized confirms under what circumstances, but also how we came before the tragic dilemmas during the Eurogroup sessions on the 15th and 25th of March.

Nor do I consider that it is to the benefit of the well-being of the country for the political forces to be spending time on divisive confrontations instead of creative cooperation. Who bears and how much responsibility will be decided by the Investigative Committee in its findings but also by the criminal and civil courts in case it will be found out that certain people caused the catastrophe through fraudulent activities, acts or omissions.

What has priority today is the undertaking of joint action and reaction toward everything that we were obliged to accept by dire necessity in order to avoid the worse.

I know that any effort to glamorize or embellish the tough measures that have been imposed on us would be an indication of inability to comprehend the real problems that society faces but, most importantly, it would create the impression that there is a lack of vision, courage and determination on the part of the Government and the State to provide the foundations on which to support the restarting of the economy and the reorganization of our state.

What I want to assure the people is that, as a State, we will be fearless in the face of challenges and that we will not renounce our role or our responsibilities. That is why, through an exhaustive dialogue with organized parties and the academic, business and professional community, and taking into consideration the views of the ordinary citizens, we reached a well - balanced program that addresses today's needs but also tomorrow's prospects.

Ladies and gentlemen,

I present today the first set of measures that aim to mitigate the problems faced by the vulnerable and sensitive groups of the population as well as by thousands of our fellow compatriots who experience unemployment. At the same time, it includes incentives and measures that encourage investments, help the economy to restart and will bring growth.

Measures for the vulnerable groups of the population:

Realizing the problems that have emerged as a result of the economic crisis and which are faced by a large part of our compatriots, we announce the following measures:

1. For those of our fellow compatriots who face problems in meeting their loan obligations, we have succeeded through the loan agreement to secure the possibility to extend the repayment of the loans and therefore the reduction of the installments that are paid without any additional cost on the part of the debtor. Those who face problems are asked, within the next 60 days, to contact banking institutions in order to make the necessary restructuring.

2. During the period of negotiations and until the final restructuring no debt is considered as non-serviceable and therefore no measures against the debtor will be taken.

3. In the same framework, the Government, to the extent that it is institutionally allowed, is making serious efforts to find ways to reduce interest rates on loans.

4. For the above purpose, the Government, by the end of June, will promote regulations that will allow overcoming any legal, administrative or other obstacles that impede debt restructuring. In this context, regulations will be promoted so that the expenses to achieve restructuring are significantly reduced.

5. To ensure the above announcements, the Government will promote, at the same time, legislation for the appointment by the end of May of a Bank Ombudsman, with clear terms of reference to ensure equitable restructuring of loans.

6. In order to provide additional measures to protect debtors who are unable to meet their obligations, the Government will directly promote legislation with which the owners will be protected from the deprivation of their residential or commercial roof. Through the provisions of this legislation, the bank and the debtor will be given the right to reach an agreement in order for the bank to purchase the property at the value of the loan and the owner to rent it for a specific period of time. The advantages are that the debtor/owner becomes a tenant without becoming homeless and will be able to repurchase the said property at the end of the period, at the then value of the loan.

7. The Government has decided the establishment of a Court of Arbitration that, in an expeditious manner, will examine and award compensations to the holders of capital securities or bank bonds who have been deceived and are not institutional investors. A relevant bill will be tabled to the House of Representatives within the next few days, while the function of the Court is expected to begin by the end of June.

8. The Government’s decision for further reduction in electricity price, the total amount of which will reach 9.5%, falls in the same context of relief for vulnerable and disadvantaged groups.

9. An additional relief measure is also the decision to subsidize up to 50% of the cost for the installation of photovoltaic systems in residential units, based on economic and social criteria. For 2013, it is estimated that 2.000 households will be benefitted.

10. Following consultations between the Government and the public universities, it has been decided, for relief, again, of the vulnerable population groups, that the two universities will increase this year’s number of newcomers’ positions by 135 and, at the same time, will offer another 235 positions for the transfer of students from other universities abroad.

Ladies and gentlemen,

Recognizing that unemployment is one of the reasons that affect social cohesion, we have decided the implementation of a series of measures to alleviate this huge social problem.

Through extraordinary solidarity measures that we have adopted, and we expect that will be voted by the House of Representatives, the following are ensured:

1. The reappointment of 800 hourly paid employees.
2. The reappointment of contract teachers.
3. The employment of the 300 graduates from military academies.
4. In addition to the above, and through reallocation of Budget funds, in the next days we will implement a series of plans that ensure:

i. Employment of 6.000 unemployed in the tourist industry. To this end, the Government will grant EUR 21 million to subsidize up to 40% of the wage cost. A prerequisite is that employers hire registered unemployed persons, who should be legal and permanent residents of Cyprus over the last five years.

ii. By a new Plan, the cost of which amounts to EUR 6.8 million, the state will subsidize the salary of unemployed citizens, based on the aforementioned conditions, by 65% for employment with flexible arrangements such as flexible working hours and work from home. It is a prerequisite that the employer:

- Offers employment to the employee for at least ten months.
- Does not employ illegal or undeclared workers.
- Has not reduced the number of employees in the business since the announcement of this plan.
- Has settled all his debts to the state.
- Does not employ, on the basis of the Plan, relatives or company shareholders.

With the implementation of the Plan it is expected that job opportunities will be created for approximately 1.000 people.

5. Along the same lines is the Government’s decision for additional tax deduction from taxable corporate income of up to 25% for each additional worker who will be employed in the next year, with a prospect of expanding that period. It is understood that the employee must meet the conditions laid down in the aforementioned plans, namely, he/she must be a permanent legal resident of Cyprus over the last five years.

6. The Government, in an effort to encourage a shift towards the primary sector, has decided to allocate to young farmers arable land belonging to the Government, the Church and the University of Cyprus. The allocation of land will be made according to professional, financial and social criteria for a nominal rent. The Ministry of Agriculture will provide the appropriate training, consulting and other support to the beneficiaries. On this occasion, I would like to thank the Church and the University for their kind offer.

7. In order to preserve jobs in the vital field of livestock farming, the Government has recently approved exceptional support towards farmers amounting to EUR 3 million.

8. Immediate implementation of the pending Support Scheme for Young Entrepreneurs, by speeding up the evaluation procedure. The Scheme will create 1,000 new jobs at a cost of EUR 10 million.

9. For the purpose of university graduates to acquire work experience and specialized training, known as “stage”, the Government has decided, at a cost of EUR 4 million, to provide the opportunity to over 1,000 unemployed university graduates to work in the private or public sector in order to obtain a work experience certificate. Participants in the programme will be given a monthly allowance amounting to EUR 500, while at the same time their practice will be deemed as insurable employment and the state will pay their contributions to the Social Insurance Fund.

10. At the same time, I have to say that there is a dialogue in progress between the Government and social partners for the purpose of achieving a “gentlemen’s agreement” aiming at the maximum possible utilization of local labour force through the implementation of flexible employment terms, of a two-year duration, to cater for the needs created by the exceptional situation of the economy.

Social policy

It goes without saying that the economic crisis increases the state’s obligations to exercise social policy, while at the same time limits its resources. In order for the state to be able to meet its social role, it should revise and rationalize its subsidy policy. For the achievement of the above purpose the Government has decided:

1. Rationalization of public benefits so that on the one hand allowances are granted to those really in need, while on the other hand, for the economically active population, namely those who can be employed, any allowances should be lower than the income coming from employment. In this way the dependence on benefits is avoided while at the same time it does not foster disincentives for employment.

2. To end the right for unemployment or social allowance to those who reject twice the offer by the Public Employment Service for work that fits their qualifications.

3. Within the framework of rationalizing social policy, the Government is going ahead with a modification of the subsidization system to cover the needs of asylum seekers or other foreigners, so that Cyprus will stop being an immigration haven. The monetary subsidy is reviewed with a substantial reduction, while the monetary amounts that are given for food and clothing are replaced with coupons. In this way we are facing the abuse taking place until today, while at the same time it is ensured that public benefits will be used in such a way to help the Cypriot economy. At the same time, the basic needs of the receivers will be safeguarded, without deviating from our obligations that derive from our status as a member state of the European Union.

4. There will also be a change in the regulations that concern the housing of foreigners. Housing will be offered in places that the state owns or rents, while the rent allowance will be paid directly to the owner.

5. Discontinuance of any subsidy for foreigners in case of denial of an employment offer in sectors and periods that employment is allowed.

6. The termination of free medical care for those who do not contribute to the Social Insurance Fund for a time period of three years, but also to those who have not settled their tax debts. Persons receiving long-term treatment and serious emergency cases are exempted.

7. Aiming at the reinforcement of the health sector, the decongestion of state hospitals and especially the improvement of the quality of services rendered, the Government has decided the extra purchase of services from the private sector, at a cost of EUR 6 million.

8. The Government has decided to immediately go ahead with a dialogue with all the involved parties in order to expedite the application of a viable and effective National Healthcare System.

Growth measures

We are aware that in order to give boost to the economy and achieve positive growth rates immediate actions need to be taken in sectors that have been affected to a large degree by the economic crisis. Aiming at restarting the economy, we have processed the implementation of a series of measures which are aimed at attracting local and foreign investments and, as a consequence, creating new jobs.

1. It has been decided that the time needed to issue a Planning Permission will be reduced and it will not exceed one month for small-scale projects and three months for large-scale development projects.

2. The conclusion of an agreement between the Republic of Cyprus and the British Bases is being expedited, regarding development planning of land that falls within the boundaries of the British Bases. Development benefits for the economy will be of a substantial size since the land affected is a huge area and covers more than fifteen communities. I would like to assure everyone that any agreement will fully safeguard and will not allow in any way for the existing status to be put at risk. We would not like it to be diversified. What can easily be understood is omitted.

3. Increase of the building coefficients under specific preconditions as follows:
- By 30% in urban town centres for large-scale commercial developments.
- By 25% in the outskirts of urban areas for large-scale commercial or unified developments of office spaces.
- By 20% in specific tourist zones for large-scale properties, defined as special areas.
- Finally, increase of the building coefficient for golf courses from 10% to 15%.

4. Broadening the range of permitted land development in off limit areas for large projects.

In addition to the above, the Government has decided to implement an additional set of measures in order to reinforce the tourism industry.

5. Licensing of casino operation. For this purpose, the conducting of a study was assigned, which will be ready, and I hope that it will be quickly brought to the House of Representatives since the bill is ready, by the end of May.

6. Extending the tourist season by two months through the implementation of subsidy programmes for the unemployed, as mentioned above.

7. Encouraging the immediate implementation of projects for the construction of golf courses by providing the following incentives, in addition to increasing the building coefficient:

i. Extending the repayment of EUR 5 million for the issuing of a license, provided that the project will be launched within the next two years.
ii. The irrigation of golf course developments will be carried out, from now on, by tertiary waste treatment plants.

8. The granting of permits to joint tourism developments, such as condo hotels, is adopted.

9. In order to facilitate businesses that want to participate in public tenders but face liquidity problems, it has been decided to replace the guarantee with a commitment not to withdraw the offer. Additionally, the amount they pay as guarantee for the accurate execution of the project is reduced.

10. In order to encourage investments from long-term residence applicants who are third country citizens, it has been decided that:

i. permits will be granted to applicants who invest the total amount of EUR 300,000 for the purchased of more than one residence or other building, provided that they are purchased from the same vendor, and
ii. the legislative framework will become simplified and a fast-track procedure will be adopted for granting long-term residence permits.

11. It has been decided to establish the State Property Management Authority aimed at the state property’s development and exploitation.

12. It has been decided to promote a single legislative framework to govern partnerships between the public and private sector.

13. It has been decided to adopt a system of clearing for all outstanding debts between businesses/citizens and the state or vice versa. It is understood that the measure does not involve cases where there are pending disputes or litigations between businesspeople, individuals and the state.

14. The Government is in dialogue with the European Development Bank and other European institutions to create, the soonest possible, a Guaranteeing Mechanism for providing loans to SMEs in need, always with favourable terms.

15. A comprehensive action plan has been drawn, through which an effort will be made to secure additional funds and an increased EU contribution in the funding rates. I should note with particular satisfaction that the response of the President of the European Commission and the assurances I have from other Commissioners are indicative and encouraging.

16. An additional measure to support businesses is also the Government’s decision to maintain the current levels of rents paid at the industrial areas for the next five years.

Green growth

Green growth cannot but be part of the effort to restart the economy, and it will contribute to the enhancement of competitiveness and to the further development of business activities.

Towards this direction, beyond what has been announced for the vulnerable groups, namely photovoltaic systems at every housing unit subsidized by 50% by the state, by the Renewable Energy Sources Fund, the Government has decided the following:

1. The adoption – this applies to large businesses – and implementation of a plan for the reduction of the cost of electricity with the use of photovoltaic systems for commercial and industrial consumers, including public buildings.

2. In order to expedite and immediately realize projects for the installation of photovoltaic parks of an overall capacity of 50 MW, the issuing procedures for the necessary licenses are being speeded up so that the 24 companies which have been selected through public tendering can proceed immediately with the realization of the projects.

It should be noted that with the full implementation of the plans for the generation of electricity using solar energy there will be:

i. Fuel saving amounting to EUR 51 million annually.
ii. Savings amounting to EUR 2 million annually from the reduction of pollutants emission.
iii. With the implementation of the measures, 650 or more jobs are expected to be created.
iv. It contributes towards achieving Cyprus’s obligation for the increase of the percentage of electricity generated using renewable energy sources to 13% by 2020.

3. For all developments, and this is equally important, an incentive for a 5% increase of the set building coefficient is being provided in case overall energy needs are being covered by renewable energy sources.

4. The gradual turning of military facilities to “green military camps” falls within the same framework of government planning, with “ecological adaptation”, through the use of renewable energy sources, recycling methods et.c., being one of the most important benefits.

Ladies and gentlemen,

An issue of high national importance which will add another dimension to the country’s economic growth is the sector of utilization of our natural wealth.

The discovery of hydrocarbons is not a case that concerns only the Government in power – whichever that may be - but requires the setting of a national policy with the cooperation of all political powers as a whole.

The Government, bearing the responsibility, will assign to the competent Ministry as well as to the technocrats of the different energy services involved to prepare a Road Map with concrete suggestions for the management of the energy policy which will be completed within the next fifteen days. On the basis of these suggestions, the Government will draw a comprehensive action plan for the management of all issues regarding the energy policy.

Immediately after that, the National Council will be convened in order to adopt, through collectiveness, the National Energy Policy. I have to say that neither experts nor academics will be ignored as regards the planning of the energy policy. The only thing I can announce today, which is in my view everyone’s common policy, is the decision for the construction of a natural gas liquefaction terminal in Cyprus.

Ladies and gentlemen,

The first set of measures that we present today concerns the main priority of the Government, that is protecting the vulnerable and sensitive groups and coping with unemployment, and includes the provision of growth incentives which constitute the basic pillar for restarting the economy and safeguarding the standard of living of the people and the protection of social cohesion.

Nobody can ignore the fact that the measures above are taken in particularly difficult economic circumstances, within suffocating timetables and narrow fiscal frameworks. The whole program being announced not only does not create extra burden but, through redistribution of funds and programmes, it is completely compatible with our fiscal targets.

I would like to stress that the measures announced today are neither exhaustive nor the only ones. It is clear that important measures regarding the financial sector, the sector of services, technology and research, as well as other equally important sectors of the economy, will be the subject matter of a new presentation in mid - May. The reason is because more study, elaboration and regulation is needed. As you are all aware, until the end of March our only concern was to deal with the demands, the blackmails and the whole procedure for the conclusion of the loan agreement. I wish to say that between today and the 20th of May we will announce the second set of measures on institutional changes and the modernization of the state.

It is natural that many of the measures are not explained in detail for reasons of time as well as of essence, so the competent Ministers are at the disposal of all interested, as well as through directions given to their staff, to give complete information about the measures announced.

Ladies and gentlemen,

I wish to stress with special emphasis that in order to achieve the restart of the economy and the exit from the crisis as soon as possible we cannot but keep with strict consistency any obligations undertaken through the loan agreement.

There is no doubt that difficult ordeals are ahead, so I ask for your understanding and the patience of all. If we do not comply with a well-balanced program, far from populism and unattainable proposals, we will be faced with more painful consequences.

Knowing your patriotism, the creativity and obstinacy characterizing a people tried in circumstances more adverse than today’s and having proved that it can rise on its feet again, I am confident that we will make it.

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