The Ministry of Finance is proceeding with an ambitious radical proposal that will create new data regarding the heavy legacy of Non-Performing Loans, with the aim of securing the first residence and professional housing as well as ensuring social cohesion.
As the Minister of Finance Konstantinos Petridis reveals to “F”, his Ministry will soon submit a proposal for the transformation of KEDIPES into a national asset management company and its purchase of the Bank's Non-performing Loan portfolio. Especially those that concern loans of natural persons with securing the first residence and the first professional housing. YPOIK points out in its interview that the beneficiaries will be able to use special projects of KEDIPES either with an increased state contribution or to become beneficiaries of the Mortgage to rent Plan, based on which there will be a significant rent subsidy to socially vulnerable groups, with the right of repurchase. of their home in the future at a reduced price. The proposal also aims at a drastic reduction of NIS in addition to the protection of verticals. Activation of the proposal requires the approval of the European Authorities.
-The pandemic and the government measures against its spread, hit many businesses causing huge reactions. How are these companies supported and what other measures are you possibly considering as the Ministry of Finance?
-When you close companies by law, when employees are forced not to work for extended periods, you realize the consequences. All this time, the state absorbs the shocks in their economy with various support measures. I would divide the support into two parts. It is the support to the income of the employees, that we are currently implementing their 11th support plan. It is also the direct support of companies that as of Monday already began to be deposited in the accounts of companies the third and largest one-time sponsorship amount, of the order of 200 million that concerns 30,000 companies. This support, which is a great injection of liquidity in the market, is proportional to how much each company has been affected all this time based on its turnover. And it's a big, direct and non-refundable sponsorship to all those affected. From private tutoring, to farmers, to restaurants, to the media, restaurants and hotels, to retail. With special arrangements for tourist areas such as Famagusta and Paphos, while a special plan was made for the bodies of Culture. This support is extremely important for businesses. In total, since the pandemic began in March, emergency government support has reached about 1.5 billion euros, whether it concerns sponsorships, income support or other liquidity measures. Without these measures we would have already been in financial ruin.
– How concerned are you about the whole situation and the measures to contain the pandemic? Has any cost estimation study been done for the Economy? How scary is the next day of the pandemic?
-Of course we make our estimates. For example, in 2020, the impact of the pandemic on GDP was around 8.5%, since instead of recording growth of 3% we had a recession of around 5.5%. This equates to a loss of national income of 1.5 to 2 billion compared to what we would have without the pandemic, and it is this loss that is partially covered by state support. Despite the magnitude of the recession, we compare very favorably with the European Union average, and especially with the other tourist countries, where the recession will be in double digits. For each week that passes with a lockdown in January, the lost production exceeds 700 million euros. Of course, this crisis is not just mathematical, everyone is affected differently, and there is still a great deal of uncertainty as the course of the economy depends on the evolution of the pandemic, the speed of vaccinations, the mutations of the virus. But for every day that a business is closed, the risk of not reopening increases greatly. Our role is to make budget-based surgeries based on our capabilities so that we can mitigate the costs and impact on our fellow citizens. And we have achieved this to a large extent to date, despite the fact that we will not emerge unscathed from this crisis.
-Do you recently enter the markets for this purpose?
-Exactly. Once the pandemic hit, we decided we needed to increase our cash flow so that we could keep the economy afloat. That is why we went to the markets in April, almost doubling the liquid assets of the state. Our goal is to keep them at a high level until the market is restored to normal. To do this, we must be trusted by foreign investors and markets, from which we draw this liquidity, and even at low interest rates. It is a great success that we have been able to raise quite a lot of liquidity in the midst of a pandemic, and in fact, historically, with the lowest interest rates we have ever had. The markets have trusted both the Cypriot economy, its prospects, and the policies of financial management of the pandemic by the Government, and this is something that satisfies us and makes us optimistic.
-There have been many reactions to the Government's measures against the pandemic and voices of protest from various professional groups and companies. As Minister of Finance, how do you assess the situation and to what extent did the financial aspect of the measures play a role in decision-making?
-It makes sense to have protests when businesses close. We listen to all the voices of agony and help. Conditions are difficult and a Government must decide in the public interest regardless of the protests, even if justified. The preservation of public health has always been a priority, while financial data are always taken into account in decisions. I think the handling was the right one and this is demonstrated by both the health and economic data which are comparatively much better than other EU countries. as well as other developed countries.
– One of the issues that concerns the public debate is the protection of vulnerable borrowers in conjunction with sales and the process of reducing NPLs. What do you aim to do in this direction?
-Most progress has been made in reducing NIS since 2014 but more needs to be done to finally solve the problem, without any social consequences for the really vulnerable. A very important policy for which we are at a very advanced stage of elaboration and will be submitted in the coming weeks, is the transformation of KEDIPES into a national asset management company, and the purchase on its part of the MES portfolio of Banks – especially those concerning loans to individuals securing the first home or the 1st professional home. As a state body, KEDIPES will implement special plans for these categories of our fellow citizens, so that they either maintain their first home and professional housing with an increased state contribution, or become beneficiaries of the mortgage to rent plan based on which There is also a significant rent subsidy for socially vulnerable groups, with the right to repurchase their homes in the future at a reduced price. In this way we will ensure both social cohesion for our truly unsustainable fellow citizens, and the drastic reduction of NIS to protect our fellow citizens. Of course, this issue will have to be approved by the European authorities, but it will be extremely important to turn the page on this heavy legacy of NIS. of the country.
– The issue of passports is and will be a big burden for the Government. Does the economic benefit for the economy offset this political cost for both the Government and the country in general?
-I think no one can dispute how beneficial the Plan was in the post-2013 period. Thousands of jobs were created, businesses that would close survived, NPLs were reduced in times very sensitive for the banking sector that threatened the deposits of our fellow citizens. The government does bear the political costs, without benefiting politically from the positive effects of the program. As well as broader development policies.
– Knowing the program first hand, what do you think was its biggest hole? Can you say with your hand on your heart that there was no abuse of the program by people who took advantage of their political position?
-As I mention in my deposition, the program operated in an emergency. Abuses, mainly by providers, created the need to strengthen control measures, which were taken successively. It may also be too late to establish a list of high-risk people. In retrospect, it is easy to criticize, which we accept.
WE TOOK THE RESPONSIBILITY
-What does taking responsibility mean for you personally?
Taking on any state position automatically means taking responsibility. For any act, policy, or for omissions and mistakes, A politician takes responsibility every day and is judged every day, and in democracies this responsibility is attributed and taken over by elections. If you think that your actions or omissions have harmed the public more than they have benefited, or if your responsibilities are being transferred to others, then there is the issue of personal responsibility which can also mean resignation, depending on how everyone judges. I believe that the main responsibility we had as a Government was to save this place from bankruptcy, it was the consolidation of the welfare state, it was development. We, as the Government, have taken on this responsibility and carried it out, regardless of whether mistakes were made that could not be avoided when you try and when you do not remain inactive.
– Is there a danger for a new memorandum? Are you considering any financial reflection measures? How do you comment on the wage inequality between the public and private sector which is constantly shrinking and how much are the state funds burdened in difficult economic times by increases in the state wage?
In Europe at the moment it is questionable whether the outcome of the crisis will turn into a new debt crisis. My philosophy is that the debt will increase, but occasionally, and if the economy reopens normally at some point then we will return to a declining course of debt in 2021, without jeopardizing its viability to go on adventures. The increase in debt this time is not due to structural weaknesses, but to emergency support interventions. By this logic, it is pointless to talk at the moment either about memoranda or other measures that will further affect the demand in a time of crisis, which demand we try to keep high through our interventions. Such policies at this time would create a vicious circle of austerity and recession. We must understand that this crisis is completely different from that of 2013 and is being dealt with with other weapons. Then the crisis was fiscal and consolidation had to take place, while now healthier public finances allow us to intervene with expansionary policies to support our fellow citizens and not deprive them of purchasing power.
This crisis is very different from 2013 and is being dealt with with other weapons
– Is there a danger for a new memorandum? Are you considering any financial reflection measures? How do you comment on the wage inequality between the public and private sector which is constantly shrinking and how much are the state funds burdened in difficult economic times by increases in the state wage?
In Europe at the moment it is questionable whether the outcome of the crisis will turn into a new debt crisis. My philosophy is that the debt will increase, but occasionally, and if the economy reopens normally at some point then we will return to a declining course of debt in 2021, without jeopardizing its viability to go on adventures. The increase in debt this time is not due to structural weaknesses, but to emergency support interventions. By this logic, it is pointless to talk at the moment either about memoranda or other measures that will further affect the demand in a time of crisis, which demand we try to keep high through our interventions. Such policies at this time would create a vicious circle of austerity and recession. We must understand that this crisis is completely different from that of 2013 and is being dealt with with other weapons. Then the crisis was fiscal and consolidation had to take place, while now healthier public finances allow us to intervene with expansionary policies to support our fellow citizens and not deprive them of purchasing power.
“1.8 billion for development projects and 1 billion from the recovery fund”
– Did the issue that arose with the budget and the addition of provisions by other political forces, affect in any way the planning of the Government?
– As for the substance of the budget, no. More damaging was the uncertainty that was created, which also sent a negative message abroad, especially in a time of international economic crisis. But passing the budget has prevented the worst. I also thank the opposition parties that went overboard and supported the budget at this nationally critical time.
– Could all this debate and delay over the adoption of the budget have been avoided? Why didn't you take any initiatives earlier?
– Of course, initiatives were taken, not only at my level but also at the level of the President of the Republic. My view is that the budget could not be voted on from the first time despite any initiatives taken as the vote was more of a political statement, and I think everyone understands that. Fortunately, some parties made the political excess for the good of the country.
– What are the possibilities for exploiting funds from European funds? What actions do you intend to take and what do you expect to take and which sectors of the Economy and how much will benefit from this money?
– First of all, let me mention that European funds are an important part of the budget. As for the funds that have to do with the multiannual financial framework, with projects over 1.8 billion, a very good planning has been done that can change Cyprus for the benefit of our children, and I really mean it. Green development projects, for example, exceed 700 million, while there are very important funds for digital transformation, and other important development projects. We will raise another 1 billion euros from the recovery fund. The projects that will benefit the next generation but will also directly support our fellow citizens and give a social sign. For example, more than 70 million euros will be allocated for a photovoltaic subsidy and energy upgrading of houses, which will mean direct household savings from electricity. Another 30 million will be given to subsidize tuition or create infrastructure for the care of infants and children so that parents and especially young mothers can more easily integrate into the labor market. Another 110 million concern the integration of the unemployed in the labor market. Of course, a large part of the planning also concerns reforms which will be preconditions for the disbursement of funds, and for this we will need the cooperation with the Parliament. To this end, in addition to the consultation I had with the party leaders, we have already convened a cross-party technical committee which met for the first time last Tuesday. The recovery fund must be seen by consensus as a common national challenge.
– At that critical period of the budget vote, the president of DISY Averof Neophytou took over the burden and the initiative of the contacts. Why was the Government absent? To credit Pindarou for her success?
– The Government was never absent, and I think I have answered your question. And all the contacts made by the president of DISY were in full consultation with the Government. We have a peculiar political system, which requires the involvement of all in order to reach those consensus between the executive and the legislature. Alas, if in this crisis the President of the parliamentary party that supports the government did not actively participate in the processes of securing a parliamentary majority.
-The budget was finally approved. What are the possibilities for European funds to be used? What actions do you intend to take and what do you expect to take and which sectors of the Economy and how much will benefit from this money?
– First of all, let me mention that European funds are an important part of the budget. Regarding the funds that have to do with the multiannual financial framework, with projects over € 1.8 billion, a very good planning was done which can change Cyprus for the benefit of our children, and I really mean it. Green development projects, for example, exceed 700 million, while there are very important funds for digital transformation, and other important development projects. We will raise another 1 billion euros from the recovery fund. The projects that will benefit the next generation but will also directly support our fellow citizens and give a social sign. For example, more than € 70 million will be allocated for a photovoltaic subsidy and energy upgrading of houses, which will mean direct savings of households from electricity. Another € 30 million will be given to subsidize tuition or create infrastructure for the care of infants and children, so that parents and especially young mothers can more easily integrate into the labor market. Another € 110 million concerns the inclusion of the unemployed in the labor market. Of course, a large part of the planning also concerns reforms which will be preconditions for the disbursement of funds, and for this we will need the cooperation with the Parliament. To this end, in addition to the consultation I had with the party leaders, we have already convened a cross-party technical committee which met for the first time last Tuesday. The recovery fund must be seen by consensus as a common national challenge.
