Finance Minister stands firm on economic stability amid rising pressures

In a recent interview with Andreas Kimitris, Cyprus Finance Minister Makis Keravnos discussed his unwavering commitment to the country’s economic stability. He stated, “I have drawn my red line and I am not going to make any concessions that would have an impact on the economic stability of the country.” Keravnos acknowledged that he faces daily pressures to relax fiscal discipline, with demands coming from all directions. He believes the best way to address these pressures is by presenting strong arguments that cannot be disputed.

When asked about the government's plans to tackle rising costs, Keravnos emphasized that they are constantly monitoring the situation. He mentioned that new measures are in development, and the government will act as needed, similar to its previous responses to economic challenges. One area of focus is the electricity subsidy, which is set to expire at the end of October. He expressed hope that a decision on its continuation would be made soon.

Keravnos also addressed the reintroduction of a zero VAT rate on essential products, which had not been reinstated previously. He explained that while the earlier measure was temporary and broader in scope, the new plan will make this zero VAT rate permanent on a select few products to support vulnerable groups and the middle class. He defended this approach against criticism that it was too generalized, arguing that it still helps those in need without requiring burdensome verification processes.

The conversation also turned to the recent fiasco at the Vasilikos port, which raised significant financial concerns. Keravnos acknowledged that the state has weighed the financial risks involved with this incident. He emphasized the necessity of completing the related project to enable gas imports, which could help reduce energy prices. Discussions are underway with various financial institutions, and he indicated a positive response regarding the project's future.

Throughout the interview, Keravnos faced questions about the criticism he received for allowing certain measures to expire. He asserted that a finance minister should not feel “exposed” for implementing social measures that benefit the vulnerable. He noted the backlash against the expiration of these measures, particularly concerning rising prices for essentials like baby milk and diapers. Despite this, he remained resolute that any decision must consider the broader economic impact.

Despite pressures from various parties for more spending, Keravnos affirmed that he won’t yield to populism. He highlighted that the budget is balanced and growth-oriented, expecting Parliament to act responsibly in approving it. He acknowledged discussions with political parties, recognizing their need to stay within the country’s financial means.

Keravnos also elaborated on the recent pay increase for civil servants. He explained that this increase was part of a collective agreement and included a provision to help lower-paid workers. He indicated that no increase in the state payroll is planned for the next two years, reflecting efforts to control spending.

In discussing broader fiscal challenges, he noted that the International Monetary Fund (IMF) is conducting a study on the state wage bill to help manage its growth. Keravnos also expressed caution regarding the costs associated with the electricity interconnection project, warning that rising expenses could impact the overall state budget.

With a firm commitment to fiscal responsibility, Keravnos expressed confidence in his decisions, stating, “I sleep peacefully at night with a clear conscience.” He concluded the interview by reiterating that pressures for concessions are constant, but he remains focused on arguments that will uphold the country’s economic stability.

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