Cyprus: a Recovery in Progress
Cyprus’s banks all passed the European Central Bank’s stress tests, a result that is indicative of the recovery that is under way in the country’s financial sector. However, for these institutions to return to full health they must tackle their non-performing loans, a feat that is as much in the hands of the country’s politicians as its bankers.
Banking sector stress tests tend to be a make or break affair. For Cyprus, the comprehensive assessment by the European Central Bank (ECB) was a blessing. While there still is much to do to ensure economic recovery following the 2013 crisis, Cyprus has worked hard and achieved more than was expected of it in past 18 months.
The country has outperformed the economic forecasts made by the International Monetary Fund (IMF) as well as the government’s own, more optimistic estimates. While preliminary gross domestic product (GDP) figures show that the country did not grow in 2014, it is expected to return to growth in 2015.
“In the short term, we have performed well,” says George Vassiliou, former president of Cyprus, who was in office between 1988 and 1993. “Cyprus has surprised the experts from the troika [of the EU, ECB and IMF] because we performed [well] and they did not expect this.”
Some tough reforms had to be passed, and banks had to be recapitalised and restructured, some with savers’ money. Unemployment has shot up to more than 16% from levels as low as 3.6% in 2008, but things seem to be turning around…
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Source: ACB
