Nicosia exits excessive imbalance process
Ten years after the outbreak of the financial crisis it suffered, with the bank bail-in, the Republic of Cyprus has finally exited the excessive imbalances procedure (EIP) of the European Commission, on the basis of the European Union documents that were issued under the spring package of the 2023 European Semester on Wednesday in Brussels.
The EIP procedure shows that a member-state is experiencing excessive vulnerabilities and it is placed under enhanced surveillance to ensure compliance with EU fiscal rules.
An EU official in Nicosia also said that Cyprus has already achieved its medium-term fiscal target, since the EU is poised to restore its fiscal rules as the Stability Pact’s escape clause will be terminated at the end of the year.
“Cyprus has achieved significant progress and it is on a path of gradual correction,” the European official said, noting that the island is now in the imbalances procedure.
The emergence from the EIP has mainly been thanks to the reduction of private debt from 250% of gross domestic product at end-2021 to 217% at the end of last year, the reduction of public debt by 14.5 percentage points to 85% of GDP in 2022, as well as the decline of the stock of nonperforming loans (NPLs) to 5.2% under the Commission’s methodology.
The same official said that these indices are placed on a downward path.
Cyprus also showed improved its Net International Investment Position to -105.3% of GDP, which, excluding special purpose entities, declines further to -40.9% GDP.
Furthermore, echoing the European Commission’s recommendations for Cyprus, the same official said that the government should expedite the implementation of its 1.1-billion-euro National Recovery and Resilience Plan as Cyprus has received just one disbursement so far, achieving 14 milestones of the plan’s total 271.
He went on to remind that under the EU Recovery and Resilience Facility, disbursements will end in June 2026.
The same source said that Nicosia should do more to promote renewable energy, in a bid to reduce dependency on fossil fuels, highlighting that Cyprus should particularly promote sustainable transport, which accounts for 42% of energy demand in Cyprus.
