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Cyprus dismisses EC warnings about budgetary deviations, insists on its own assessment

Xinhua, November 17, 2016 Adjust font size:

Cyprus dismissed warnings by the European Commission on Wednesday that its budgetary planning for 2017 risks pushing its economy off target.

Finance Minister Harris Georgiades said that Cyprus is committed to continue a prudent management of its public finances after exiting its three-year economic adjustment program in March, but insists on the correctness of its own projection regarding its budget deficit next year.

The deficit is estimated by the Ministry of Finance at 0.5 percent of GDP structural balances, in line with EU rules set down in 2007, but the European Commission said on Wednesday that its projection is for a 0.6 percent deficit, which is a deviation from the rules.

The Commission said that the abolition of an extraordinary tax on properties of one per 1,000 introduced as one of the requirements for the 2013 10-billion-euro(10.68 billion U.S. dollars) bailout of the Cypriot economy, plus an extra expenditure of about 300,000 euros to set up a partially professional army will push the budget off target.

It said that Cyprus is among six countries whose budgetary planning for 2017 might result in some deviation from medium-term budgetary objective.

The other countries in this category are Belgium, Italy, Lithuania, Slovenia and Finland.

But Georgiades told the Cyprus News Agency that the government insists on its own projections of the structural deficit, stressing that they are based on actual economic facts and the achievements of the Cypriot economy.

Georgiades also sent a document to the European Commission explaining the reasons he insists on his projections.

"Cyprus's economy has over-performed regarding its targets and any additional measures would be unneeded and counterproductive as they would undermine the prospects of the economy," he said.

However, he added that the government takes notice of the warning of the European Commission regarding its budget for 2017 that is expected to be debated by parliament in December.

Cyprus's economy has outperformed during all three years of adjustment of its economy.

The actual growth of the Cypriot economy up to the third quarter of 2016 has been put to 2.8 percent, which is also above the projections of the European Commission. Endit