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Cypriot Sacrifices Not In Vain

Cypriot Sacrifices Not In Vain

The Government’s difficult but essential reforms in the financial and public sectors are now bearing fruit and, after three years of recession, Cyprus has returned to healthy economic growth, last year posting one of the highest growth rates in the euro area. This is the view of Jean-Eric Paquet, Deputy Secretary General of the European Commission and one of the keynote speakers at the 7th Nicosia Economic Congress.


Gold: How do you feel about the UK’s decision to withdraw from the European Union? 

Jean-Eric Paquet: We regret the United Kingdom's decision to leave the European Union but we respect it. We will soon begin negotiations on its orderly withdrawal from the EU, which we will approach constructively. Our goal is to reach an agreement. For us, it is clear that if you want to divorce but remain friends on the basis of a new relationship, you first need to agree on an orderly separation. The sooner we agree on the principles of an orderly withdrawal, the sooner we can prepare our future relationship. In the future, we hope to have the United Kingdom as a close partner. 


Gold: At this time of the EU’s 60th anniversary celebrations, are you confident that the Union has a bright future?

J-E.P.: Rome was not simply a birthday celebration. It marked the birth of the EU at 27 and of a new chapter in our history. At this important juncture, the Commission's White Paper on the future of Europe presents a number of scenarios for how the EU could evolve, depending on the decisions we make. The starting point for all of them is our unity at 27. Globalisation, security and a changing society and the development in the world of work are profoundly affecting the daily lives of Europeans. There are as many challenges as there are opportunities. There is no better time – and there is no other time – than now to have this debate. This is about our people. This is about our future. This is the beginning of an honest, open debate on our future. It is time to bridge the gap between what people expect of Europe and what Europe is able to deliver. The end goal is to reach a unifying consensus on how best we can move forward. Europe must now choose. This can be Europe's hour, but it can only be seized by all 27 Member States acting together with common resolve.


Gold: Do the anti-EU and ‘populist’ party successes across Europe cause you particular concern?  

J-E.P.: As President Juncker has already said "The populists are spreading slogans. We have to offer solutions and answers." He also usually warns politicians not to imitate populist parties as, in the end, the people vote for the original.


Gold: There was considerable anti-EU feeling in Cyprus following the 2013 bail-in of depositors of Laiki Bank and Bank of Cyprus. Can you understand why people felt let down by the Union?

J-E.P.: At the end of June 2012, Cyprus received an economic programme to address financial, fiscal and structural challenges. The purpose of the programme was to restore the soundness of the Cypriot banking sector and to rebuild depositors' and market confidence; to correct the excessive general government deficit; and to support competitiveness and sustainable and balanced growth.  

Given the magnitude of the challenges faced, Cyprus had to implement difficult but essential reforms in the financial and public sectors. The sacrifices made by the Cypriot people during these few years have not been in vain. The policies implemented by the Cypriot government are now bearing fruit. After three years of recession, Cyprus has returned to healthy economic growth since 2015 and last year posted one of the highest growth rates in the euro area.

Throughout this period, the EU stood behind Cyprus, providing much-needed financial support as well as technical assistance to help Cyprus emerge from the crisis. For instance, to ensure a smooth transition after Cyprus' successful exit from the economic programme, the EU agreed to increase its co-financing of projects in Cyprus from 50% to 85%, until the current regional and social policy programming period ends in 2020. This will relieve the Cypriot budget by €99 million. Furthermore, Cyprus is one of the main beneficiaries of the European Structural and Investment Funds and is eligible to receive some €874 million from the Funds between 2014 and 2020, which represents almost a quarter of national public investment.


Gold: As part of the Troika of international lenders, how do you view the country’s achievement of exiting the Economic Adjustment Programme ahead of schedule?

J-E.P.: During the programme and thanks to committed reform efforts, Cyprus has indeed managed to emerge from recession, stabilised its financial sector and consolidated its public finances faster than expected. Key structural reforms that were implemented during the programme include the overhaul of insolvency and foreclosure frameworks, the modernisation of public financial management and revenue administration as well as introduction of the Guaranteed Minimum Income. Importantly, the reforms implemented during the programme were designed to minimise the negative impact on the lowest income groups.

As mentioned earlier, Cyprus has now been enjoying a solid recovery, which has also translated into the improvement of the labour market. Looking ahead, it is essential to build on all the progress made so far to finalise the structural reforms that Cyprus needs to ensure sustainable and inclusive growth.


Gold: How does the Commission view Cyprus’ broad economic prospects today?

J-E.P.: Cyprus is experiencing a solid economic recovery and growth is expected to remain robust. Inflation is projected to turn moderately positive this year and the labour market is expected to perform strongly. The situation in the financial sector has improved. To sustain these trends in the future, continued prudent fiscal policy and a renewed reform momentum are crucial. For instance, although deleveraging efforts are already ongoing, the high level of non-performing loans still needs to be addressed.


Gold: How significant will a resolution (or non-resolution) of the longstanding ‘Cyprus Problem’ be to the EU and the European Commission? Could the EU/EC play a greater role in efforts to bring about a settlement?

J-E.P.: Since becoming President of the Commission, President Juncker has taken a personal interest in the unification of Cyprus and the Commission has actively supported the settlement process and continues to do so. This is a United Nations-led process which has always benefited from the Commission's full support. I would like to reiterate our readiness to help in whatever practical way both parties and the United Nations would find useful. 



About Jean-Eric Paquet

Jean-Eric Paquet began his career in the European Commission in 1993 in the Directorate-General for Transport, in the International Relations area, and later as assistant to the Transport Director General, Robert Coleman. In 1999 he joined the office of Gunther Verheugen (Member of the European Commission in charge of enlargement). In 2002 he became the Deputy Head of Office of Philippe Busquin, member of the European Commission in charge of Research policy. Paquet was EU Ambassador to the Islamic Republic of Mauritania between 2004 and 2007. He returned to transport in 2007 where he led the development of the Trans-European Transport Network policy. As Director for the European Mobility Network, he was responsible for Europe's transport infrastructure policy and investment strategies, the single European rail area, inland waterways and port policy.
He joined DG Enlargement in November 2013 where he took over the Directorate in charge of relations with Albania, Bosnia & Herzegovina, Serbia and Kosovo. In January 2015, he became Director for Western Balkans, adding Montenegro and the Former Yugoslav Republic of Macedonia to his portfolio.
In November 2015, he was appointed Deputy Secretary General of the European Commission responsible for Better Regulation and Policy Coordination (economic governance, internal market and competitiveness, resource efficiency and employment, education and social policies).


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