Cyprus statement - Memorandum towards the Loan Agreement

02 April 2013

Cypriot government spokesman, Mr Stylianides, commented on the formation of the Memorandum which consists a prerequisite for the Loan Agreement.

The Government inherited a preliminary agreement with many commitments and exhausted every margin of re-negotiation. Under these difficult circumstances it achieved:

• the shielding of the Republic of Cyprus’ sovereign rights regarding the planning, exploitation and management of income from natural gas. In particular, explicit references are included on the Republic of Cyprus’ exclusive responsibility. The provision to re-examine the programme by Troika is removed. It is also ensured that the income from the future exploitation of natural gas remain in the jurisdiction of the nation;
• the period of financial adjustment is extended by two years from 2016 to 2018. The adjustment becomes milder; a chance is given for the measures to be spread across five years, instead of three, and in this manner, the pressure of immediate adjustment is mitigated. The provision for privatisations offers adequate timeframes, which extend to 2018 instead of 2016. This comfortable timeframe gives the possibility for better planning and for the materialisation of the programme under better financial circumstances, which will safeguard workers as well;
• the safeguarding of jobs for hourly paid workers who would leave, but also the safeguarding of jobs for contract teachers, with a very small and tiered contribution which ranges from 0.8 per cent for low-paid workers in the public sector, and reaches up to 2 per cent for the highly paid;
• elimination of the provision to increase teaching hours by one period, which would lead 500 teachers to unemployment, while promoting a series of other measures of a long-term nature;
• the access to healthcare for 170,000 fellow citizens, which according to the provisions of the initial Memorandum would be terminated, is safeguarded for a temporary contribution-insurance fee of 1.5% on monthly salaries, for the transitional period until the National Health Insurance scheme is established. The same benefit is safeguarded on a voluntary base for families with three or more children;
• with a specific provision in the Memorandum, adequate resources are secured from the Loan Agreement for the Providence Funds that are deposited in Laiki Bank, so that they are not lost and they are treated in the same way as those of the Bank of Cyprus. We are reminded, at the same time, of the decision by the Government to put together a comprehensive plan with the aim of the added and biggest possible safeguarding of the workers’ pension rights;
• the limitation in the number of civil servants by the end of the programme period, from 5,000 that was initially agreed, to be reduced to 4,500, facilitating, in this way, the smooth adjustment of the size of the Public Service though retirements;
• the possibility is introduced for the first time for a settlement between the banks and the customers to readjust the conditions for repayment of loans, with the aim of lightening the burden on citizens. The obligation of a settlement is legally guaranteed, while for the facilitation of a more fair agreement, the institution of a Banking Mediator enters into force;
• in addition, the taxation of dividends has been avoided, which the Troika has demanded;
• in relation to the Memorandum of last November, the procedure of clearance for a first residence is extended from two years to two and a half, while the relevant legislative regulations are moved to the end of 2014; and
• in relation to the Memorandum of last November, the conditions for the resolution of the Cooperative Movement are greatly improved. Any conditions which could lead to a drastic and sudden resolution are erased and it is safeguarded that the restructuring of Cooperative Institutions will be smooth.

Full statement

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