THE GOVERNMENT will shortly be issuing €2 billion in bonds to cover normal refinancing of the public debt plus a shortfall in revenues resulting from the economic slowdown, Finance Minister Charilaos Stavrakis said yesterday.
An additional requirement is the government’s commitment to contribute €200 million to the Social Insurance Fund in the coming weeks.
Speaking to the press after a meeting of the House Finance Committee, Stavrakis said that the borrowing will take the form of €1 billion in short-term bonds – maturing before the end of the financial year – with a yield of 1.5 per cent, and €1 billion in four-year bonds offered to foreign investors with a probable 3.25 per cent yield.
Stavrakis said that government revenues from property sales had dropped by 80 per cent due to the slowdown from the world economic crisis, adding that pressure on public finances means that “measures under our economic and social policies must be completely targeted.” This last comment echoed his earlier criticism of the call by some political parties for a cut in VAT for restaurants.
DISY Vice President Averoff Neophytou said that he agreed with the Finance Minister’s assessment that the European Central Bank (ECB) will most likely reduce its base interest rate by a further 0.25 per cent. At the same time, he questioned Stavrakis’s optimism that domestic lending rates would fall, since the ECB had cut its base rate by 3.25 per cent over recent months and instead of seeing lower lending rates, borrowers have been hit with interest rate increases.
Referring to the Minister’s announcement of a further €1 billion government borrowing, Neophytou criticised the large number of ministerial statements which in his view have no real impact on correcting the current economic problems, saying that “every week we hear of another flash in the pan.”
AKEL spokesman Stavros Evagorou rejected Neophytou’s comments, saying that the DISY member “is a very good economist who knows full well that refinancing the public debt involves the issuing of both domestic and foreign bonds”, adding that “routine economic measures cannot be described as mere fireworks, especially when they involve billions of euros.”
The Finance Ministry also announced yesterday that Stavrakis will be hosting a meeting and business lunch today for all former Finance Ministers of the Republic of Cyprus. The business lunch is the latest in a series of meetings by this ad hoc advisory committee which began when the current Minister assumed his responsibilities, and is designed to achieve the widest possible consensus on the best course to follow on the economy.
