SOCIAL benefits promised by President Demetris Christofias will not affect Cyprus’ economic stability within the European Union, according to Finance Minster Charilaos Stavrakis
During his election campaign, Christofias pledged to spend €600 million per annum on social benefits and pensions, without creating new taxes.
Stavrakis had attended the meeting of the Economic and Financial Affairs Council (ECOFIN) which saw the approval of the economic convergence programme for economic stability for 2008-11.
“Our middle-term economic goals were agreed with the EU: A public deficit of 0.5% for 2008-09 and 0.7% for 2009-11 are the projected aims”, he said.
Stavrakis admitted that “the EU gave warnings to every country, but each country can give grants as it sees fit: This is how we will build social justice.”
He went on to say that the pillars of Christofias’ policy – solving the Cyprus problem and creating a fairer society – were “well received” by the EU officials.
The Finance Minister also emphasised that making Cyprus an international monetary centre was a priority for his government.
His vision was that, “Cyprus can become the Singapore of the Middle East, an international financial centre which will attract investment and create job opportunities for our country.”
“We want to attract offshore companies: Cyprus has the lowest taxation in Europe, a good workforce, and maintains good relations with key countries such as Russia and India.
“We need to contact lawyers and accountants as well as foreign investors and multinational companies to achieve this,” he said, pledging his own personal input to this effort.
Last week, following the change of government and the release of the Bank of Cyprus (BoC) annual report, the Cyprus Stock Exchange (CSE) general index plummeted 9.7% to its lowest level in six months.
Stavrakis attributed the CSE losses to “external factors”, unrelated to the election of the new government with which they coincided.
Nonetheless, inflation forecasts for 2008 are not encouraging for the economy.
According to Finance Ministry data, inflation for 2008 is expected to reach between 2.5 and 2.75%, compared to 2.4% last year.
Central Bank Governor Athanasios Orphanides has repeatedly issued warnings that fiscal restraint was needed as long as the economy continued to face inflationary pressures and has highlighted the need to curb prices as even more acute
Stavrakis said that international events such as the rise in oil prices, the increase in prices of primary sources and the fact that financing sectors of banks have been overactive, have all contributed to inflation.
He advocated that “we should approach the matter spherically, and determine a public deficit policy that is sensitive to the commitments we have made to our partners in the EU.”
