CYPRUS’ small and medium-sized enterprises (SMEs) will shortly have access to a total of €456 million in cheap long-term loans as part of a European Investment Bank (EIB) initiative to support European SMEs.
The loans will follow the signing yesterday at the Nicosia Hilton of facility agreements by the EIB and Cyprus’ three biggest banks – Bank of Cyprus (BoC), Marfin Popular Bank (MPB) and Hellenic Bank.
Finance Minister Charilaos Stavrakis described yesterday’s signing as “a significant step forward”, and said that, depending on the exact pricing fixed by each participating bank, SMEs in the sectors of industry, agriculture, commercial services and tourism should be able to take out loans for up to 25 years for as little as 4 per cent per annum.
Under three ground-breaking facility agreements totalling €228 million, BoC will draw €120 million from the EIB, MPB €50 million and Hellenic €58 million, and each bank will match the EIB facility with their own funds. This means that SMEs in both Cyprus and Greece will be able to access €240 million in long-term loans from BoC and €116 million from Hellenic. MPB will be able to offer €100 million to Cypriot SMEs exclusively, having signed a separate €80 million EIB facility agreement specifically for Greek SMEs through Marfin Egnatia Bank.
EIB Vice President Plutarchos Sakellaris said that the EIB is helping Europe’s economy to recover by “strengthening demand through supporting long-term investment on the one hand, and assisting supply by making more credit available through the banking system on the other.” He added that the three banks’ commitment to match the EIB funds in the form of low interest loans will be monitored to ensure they comply.
Vassos Shiarlis, Bank of Cyprus Group General Manager Domestic Banking, said that BoC had everything prepared so as to proceed immediately to extending loans once the EIB funds are released.
Hellenic Bank CEO Makis Keravnos said that the EIB facility not only offers financing to businesses, but also “represents a decisive factor in maintaining jobs, thereby allowing the country to confront the dreadful prospect of unemployment and the resulting social cost.”
Speaking to the press after the signing ceremony, Stavrakis said that in January “the government had promised that hundreds of millions of euros would come from the EIB as cheap liquidity in the summer, for lending long-term at advantageous interest rates to SMEs”, so the new loan facilities represent “delivery against another commitment by this government”.
The Finance Minister was also asked to respond to statements made earlier in the day by DISY Vice President Averoff Neophytou, who had challenged the government’s official spending figures.
Neophytou had quoted a written statement given by Stavrakis on Thursday, in which the Minister had said that “inelastic” state spending – such as the state sector wage bill, interest payments and spending on pensions – amounted to 49 per cent of the total budget, and then contrasted this with a statement made by Stavrakis on 16 July 2008, in which the Minister had said that 80 per cent of state spending was inelastic.
“Only a wizard like the government’s economic wizard can think that he has a magic wand with which he can lower inelastic spending one day and raise it the next”, Neophytou had said.
Stavrakis responded by saying: “It is all too easy for someone to selectively quote from statements made for a different purpose in a different period and context, and then put them together in order to draw incorrect conclusions. The figures are absolutely clear: total government spending comes to around €7 billion, the state payroll costs around €2.1 billion, so the cost of the state payroll as a percentage of the government’s budget is less than 30 per cent. These are clear-cut figures, which are absolutely indisputable.”
Referring to Neophytou’s calculations, the Minister said: “We feel that some figures have been wrongly collated, with the result that very wrong conclusions have been drawn”. He added that items such as interest payable or the funding of semi-governmental organisations could be counted as “inelastic” or not, depending on one’s interpretation, and that everyone is free to analyse the government’s budget in their own way and draw whichever conclusions they want.
