Press Conference with Mr. Werner Hoyer, EIB President
Friday 25 June, 2021
Ministry of Finance
Good morning to everyone. Welcome to the Ministry of Finance.
First of all, I would like to welcome to Cyprus once again Mr Werner Hoyer, President of the European Investment Bank, as well as members of the EIB mission, a visit which clearly affirms the very close cooperation and the intense activity that has been developed in the past few years between the Bank and Cyprus Authorities, which comes to prove, in the most concrete manner, the support the Bank has provided towards expanding economic activity in Cyprus.
The outbreak of the pandemic in early 2020 posed a very significant health risk that required immediate response in order to avoid the collapse of the national health system and the devastating loss of lives. In order to halt the spread of the virus severe restrictive measures were imposed, economy-wide, and, therefore, decisive action on an unprecedented fiscal support package was needed to cushion the contraction in GDP and employment and avoid the pandemic turning into a major economic, financial and social crisis.
The response of the government was immediate, swift and forceful, comprising of a package of budgetary, liquidity and policy measures to sustain the health system, support businesses and secure jobs.
Prospects of the Cyprus economy are promising and taking into account recent statistical data and the implementation of projects included in the Recovery and Resilience Plan, which is expected to be instrumental in the revamping and the resilience of our economy, we expect an even better performance than originally anticipated for 2021 where growth is expected to fluctuate between 4.5%-5.0% and a faster recovery of the economy reaching pre-COVID levels.
It is a great pleasure for me to sign today two Finance Contracts between the Republic of Cyprus and the EIB.
Τhe first one regards the signing of a Loan Agreement of €112 million for the financing of National Roads III Project.
The signing of this Loan Agreement with EIB, which is the third EIB project in the area of Transport in Cyprus, consists of the construction and improvement of roads and motorways that are prioritised by the Republic of Cyprus as strategic roads of National importance including also investment in fixed and mobile speed enforcement cameras with the project estimated to generate approximately 1,500 jobs of temporary employment during the implementation phase.
Today’s Agreement with EIB is of great importance, because the operation is expected to contribute directly to the local and wider economy mainly through time savings for transport users and vehicle operating costs, improved reliability and safety, and also wider impacts on productivity, employment and induced investment.
It is also very encouraging that the weighted average of the economic rate of return on the main road projects was estimated at nearly 12% while all individual project components yield an economic rate of return above 7%, indicating expected economic growth and a good social return on investment.
The second signing regards the Loan Agreement for the amount of €100 million concerning the financing of SMEs through the existing Cyprus Entrepreneurship Fund (CYPEF).
This scheme, which was put in force for the first time in 2014, was one of the most important tools for the Government of the Republic of Cyprus (RoC) to restart the economy after the 2012 crisis, when the banking system was facing serious liquidity problems.
As in the first phase of CYPEF, the RoC will participate in its portfolio with funds generated from European Investment Bank loans and the scheme will be managed by the European Investment Fund. Through CYPEF, loans with very favorable terms, such as low interest rate, long repayment period and grace periods, will be granted to the eligible beneficiaries. CYPEF products will be available through financial intermediaries that will be selected at a later stage by the Fund Manager. The participating banks will co-finance 50% of each loan, resulting to a higher CYPEF portfolio. Through the CYPEF, a total of €800 million liquidity could be channeled to the economy.
It is worth mentioning that, during the 2nd phase of the scheme, in addition to the SMEs, also midcaps companies (250-3000 employees), will be eligible to benefit from CYPEF products, while the maximum loan limit for each case increases from € 1.5 million to € 12.5 million per company.
Our aim is that the 2nd phase of CYPEF will be put into operation within the 2nd half of 2021.
We are very glad to have with us today the Chief Executive of European Investment Fund Mr. Alain Godard with whom we will sign the Mandate Agreement for the management of Cyprus Entrepreneurship Fund by European Investment Fund but Mr. Godard is with us also for another reason, he is going to make a very important announcement for the first guarantee operation in Cyprus with the Hellenic Bank under the Pan-European Guarantee Fund (“EGF”). EGF was set up by the EIB Group with contributions from EU Member States, including Cyprus, ensuring that SMEs, mid-caps and entities that provide basic services in the fields of health, research and education, have access to sufficient liquidity to meet the challenges caused by COVID-19 crisis. The Hellenic Bank will be the first bank in Cyprus to use EGF’s guarantee to expand lending to SMEs on improved conditions and I invite all banks in Cyprus to exploit this critical instrument.
It is with great pleasure that I have noticed that, in 2020, EIB again exceeded its targets in Cyprus, with business volume reaching EUR 245m. EIB’s outstanding exposure to date stands at approximately 13% of Cyprus GDP (€2.7bn) a ratio which puts Cyprus at the top of all EU countries in which the EIB is operating.
Since its first operation in Cyprus in 1981, 39 years ago, EIB signed loans for a total of EUR 4.5bn, of which EUR 2bn or 44%, (more than a third of the total lending), has been signed after the financial crisis, in the last few years which clearly shows the great interest and commitment of the Bank to economic development in Cyprus. Personally I feel honoured that Cyprus is part of this great institution which, continues to provide financial support for the European economy.
Our goal, but also our obligation, is to fully utilise all the available development instruments, such as those provided by the Bank, and I am optimistic, as well as certain, that this intense activity on the part of the Bank in Cyprus will continue in the coming years and I’m confident that EIB will continue to act as a reliable partner for sound projects throughout the EU.
Before I pass the floor to Mr Hoyer, I would like to thank the European Investment Bank, personally Mr Hoyer, and all the staff of the Bank for their assistance and contribution and for their excellent co-operation with all the competent authorities and for all their efforts to support Cyprus economy.