Can we start by talking about the restoration of the fiscal stability in Cyprus?
Looking back two years after the crisis, we now can tell that the crisis in Cyprus was both financial and fiscal, but we are back on track now. We have achieved fiscal stability, which is one of the most important pillars for sustainable growth. We managed to do that through a series of fiscal reforms and, most important, by focusing on the expenditure side of the budget. For us it was a priority not to increase taxation because Cyprus has a very favorable tax regime. We are fully aware and fully acknowledge that if we are going to achieve sustainable growth we have to be competitive. We have to compete at the international level. One of the most important parameters in determining the competitiveness of the country is the tax regime. So we achieved something that very few, if any, countries have achieved, to correct the fiscal situation within a very limited time and with no increase in taxation. From now on we will focus on improving the tax system and even reducing taxes.
We read that there have been changes recently, like no capital gains tax on property . . .
That was just the first efforts.
What are the next steps you are planning now to keep the momentum going and make sure the GDP [gross domestic product] grows?
I will highlight a few big projects we have. The first is to continue the fiscal sustainability efforts. Within the next few weeks we will submit the bill for the reform aimed at GDP growth. Nevertheless we do acknowledge that the fiscal situation is going to be central for sustainable growth. As I mentioned before, we have to increase competitiveness and you can’t do that just by words or declarations. We have a dedicated program ahead of us to implement. One of the highlights would be privatization. You will see privatizations carried out as something to boost competitiveness and bring professionals into the economy. We do have to ease the business environment. We have to make a more attractive business environment so we can attract more investors to Cyprus. That is why we have targeted specific integrators such as international companies. This is something that we will focus on in the second half of our term along with other developing policies. Like in the energy sector, there are important prospects in the tourism sector. We have made it more investment friendly and have differentiated the tourist products. Everything is changing in Cyprus. This is something I want to highlight: all the reform efforts of the ministry, big projects and big reforms, are in every part of the economic activity. I can say that Cyprus is an economy in transition. We are a very different Cyprus.
Which sectors of the economy do you think have the best potential to bring sustainable growth in the future?
I will judge from the competitive advantages of Cyprus. I would say the tourism sector has a huge potential; there is an unutilized potential in the tourism sector. Shipping is also big and if the Cyprus problem is resolved I think there will be huge potential. Even sectors that until now, like agriculture, had no potential are in for huge changes. We now have quality products being developed/grown in large-scale investments. The professional services in Cyprus are second to none and they have shown their resilience during the crisis, at a time when many people thought the professional services sector of Cyprus would be dissolved; their resilience was remarkable.
How would you describe the economic relations between the US and Cyprus?
Cyprus and American relations have not only improved but are the best point right now in comparison to the past. We recently had the visit of the American vice president recently. We do consider Cyprus as an ally of the United States and our focus is on creating economic ties between the two countries because unfortunately in the past years the economic relations were not as strong as one could expect. But there are prospects and with the improvement also of the political relations, with them being so good, I think we should focus on more business and investment. The cooperation between the United States and Cyprus should not be restricted to the political sphere or governments but should also be extended into the economic sphere.
You are one of the youngest members of the government. Have you always been involved in politics?
I have been following politics like any citizen would, but I am always trying to be well informed. It just happened that the president, though he is sixty-nine and has been in politics for forty years, saw the profile of certain people and trusted the new generation to reconstruct the country. I think judging from the results—and I’m not talking about just myself but the minister of finance too. He was entrusted with this job and now he is considered the most successful minister of finance in Europe.
Here in Cyprus we have been talking to businesspeople and they usually praise the government. In other countries, it is not the same way. Usually the business sector has different ideas, but here they seem to acknowledge what you are trying to do.
It is encouraging. They have been building up. So I don’t want to blame the previous government. I think this is a turning point for Cyprus. First we had the independence in 1960, then we had the invasion in 1974, which was another dismal turning point between the economy and the society, but this is a new turning point or cornerstone for Cyprus. That is why I see that the crisis is also an element of opportunity for us to get rid of these distortions from the past and create a more productive economy and a different political economy and society. I’m quite pleased. You know the challenges that Cyprus went through, and I think that if everything goes well Cyprus will be complete.
What are your plans for the coming year?
For us the coming year would be this year and detrimental in the efforts to resolve the Cyprus issue. We will know by the end of the year or beginning of next year whether this huge problem will be resolved. This will also shape the economic prospects of the country. This is a challenge. But then again, independent or not I would say that in 2016 we have to be able to say that we have reformed the country to a large extent. Now we are in the reforming process but by the end of next year we should be in a much better position. I want to portray this country as a reformist government, with successful reforms. The big challenge is now. There is a fear that if we exit the program we will go back. It is a challenge whether or not you have to replace the necessary mechanisms for sustainable growth, fiscal sustainability, and financial stability. Some people are focusing a lot on energy and the prospects of hydrocarbons. Our approach is that we do know that the prospects are there and that they are huge. We owe it to our country to achieve sustainable growth in a competitive economy besides those prospects. I never focus on the energy sector because I don’t want to seem opportunistic. As if now that we found the oil or gas it’s over and done with.
What would your personal message to our readers be?
My message would be that Cyprus is changing, it is becoming more competitive, it is a safe destination to invest in. We have a well-educated work force, favorable tax conditions, we have a unique location, and we don’t hesitate to admit mistakes we made in the past—and that is why we have corrected most of them much sooner than anybody had expected and we are determined to structurally reform Cyprus. Cyprus could easily become a hub in the region for investment and services. Going back to the recent history of Cyprus, regarding the crisis, I think we have proved that we can do it, so investors can trust us.
Thank you, Mr. Petrides, for meeting with us.