FinMin delves into details of 'new, more targeted measures'

Finance Minister Constantinos Petrides held a press conference on Thursday to delve into the details of the new bundle of economic support measures announced by President Nicos Anastasiades in a televised national address Wednesday night.

“In this challenge that the country is facing, which is not just health-related but also financial, we have from the start assured that the Government will stand by its citizens, employees, and businesses,” Petrides said.

Petrides: Government stood by the people from the onset

The Finance Minister said the Government moved fast with the implementation of measures to support the economy, “and there is already a big support package in motion, involving over 60 measures and is of a value of around 1.2 billion euros.”

Petrides said the support measures aiming to keep the economy afloat are one of the most generous on an EU-wide scale, particularly given the size of the island’s economy.

The support package announced after the outbreak of coronavirus brought the local economy to a near-total slowdown sought to maintain a high level of income among the public despite many not being able to go to work, to support the agricultural sector and to significantly boost the healthcare sector, while also taking into account students, vulnerable groups, parents, and workers in the cultural industry, Petrides said.

The payment of loan instalments was suspended for 10 months, electricity prices were reduced, and tax payments were suspended, he went on.

“These measures managed to not only manage the health parameter of the crisis, but also prevented layoffs, businesses bankruptcies, as well as other negative social consequences we are observing in other countries.”

The ‘new, more targeted’ bundle of measures

In this period where the island is working toward the full resumption of the economy, the new bundle of support measures for the economy seeks to offer a more targeted approach, the Finance Minister said.

Plunging into the specifics of the 13 measures announced by Anastasiades on Wednesday night, Petrides said these measures will allow the island to “cover lost ground”.

1. The participation of the Republic of Cypriot in the Pan-European Guarantee Fund

The Fund involves a new tool proposed by the European Union in view of cushioning the blow of the COVID-19 pandemic for EU member states. The setting up of the Fund was given the green light by the Board of Directors of the European Investment Bank (EIB) on Tuesday.

The Cabinet on Wednesday approved the island’s participation in the Fund, from which Cyprus is expected to draw 300-400 million euros from the fund to cover needs of the Cypriot economy.

2. Government guarantee plan for the EIB to provide loans to Cypriot small and medium enterprises and medium capitalization companies

The plan activates an already existing scheme that has been ongoing since 2014, which involves a financial agreement between the Cyprus Government and the EIB to boost the local economy and Small and Medium Enterprises (SMEs)

The Cabinet on Wednesday agreed to boost the scheme by an additional 500 million euros.

Beneficiaries are Cypriot businesses that are registered and operated on the island, and which employ up to 3,000 people,

According to Petrides, the scheme provides favourable loan terms, including low interest rates, while interest rates may also be covered by the Government’s interest rate subsidy scheme. Loans may also span up to 12 years.

But businesses that will activate the Government’s interest rate subsidy scheme will be tied by the term that they will not be allowed to lay off over 2% of the staff they employ at the date of activating the scheme, except for reasons that justify the firing of staff without warning.

3. Liquidity of a value of 800 million for the funding of SMEs through the Cyprus Entrepreneurship Fund

Petrides said the Cyprus Entrepreneurship Fund was set up in 2013 along with the EIB in order to fund SMEs through loans with favourable terms.

The Fund, he added, is managed by the EIB’s European Investment Fund which fast tracks procedures, without the involvement of the local administration.

The scheme will involve co-financing and risk sharing (50% -50%) between the Government and participating banking institutions. Therefore, the Government will receive a loan of 400 million euros from the EIB to finance 50% of the liquidity.

Beneficiaries of the scheme are SMEs employing up to 250 people, while loans may be as high as 1.5 million euros.

4. Interest rate subsidy scheme for new business loans

Liquidity prospects of businesses and the self-employed are also to be improved through a government scheme to subsidize interest rates for new loans, taken between March 1 and December 12, 2020.

Businesses affected by the pandemic slowdown are eligible irrespective of size, Petrides said, noting that the European Commission set a cap of 800,000 euros for the total subsidy.

While there is no limit to the amount of the loan, the subsidy will only cover double the sum of business’ annual payroll for 2019 or 25% of their turnover.

For businesses set up in January 1, 2019, the maximum loan amount should not exceed the estimated payroll cost for the first two years of operation.

The maximum interest rate of the loan must not exceed 4.25%. The subsidy will run for four years starting with 3.5% the first two years, SMEs will enjoy 2% in the third and fourth years and 1.5% for large businesses.

Petrides stressed the loans cannot be used to repay existing facilities or as collateral for restructuring.

5. Interest rate subsidy plan for new housing loans

The scheme involves loans of up to 300,000 euros, taken between March 1 and December 31, 2020.

The maximum interest rate was set at 2.3%, while the government will subsidize 1.5% of the interest rate for four years.

6. Subsidy scheme for very small and small businesses and self-employed persons

The scheme will cover rent, operating expenses and other costs of the self-employed and small businesses (employing up to 50 people) that were also part of Labour Ministry schemes between April 13 and May 12.

The estimated cost would be around 100 million, with some 40,000-50,000 expected to benefit from the scheme.

Businesses with one employee will be granted 1,250 euros, those with two to five will receive 3,000 euros, those with six to nine staff will be eligible to receive 4,000 euros, while those employing 10 to 50 people will receive 6,000 euros.

7. Immediate promotion of mature development projects

In order to strengthen the recovery, the Council of Ministers agreed to instruct all competent authorities to immediately announce tenders for all development projects that are mature and ready for tenders to be launched, regardless when they have been budgeted for.

Petrides said the constriction of the new building of Parliament is excluded from the scheme.

8. Plan to stimulate airlines to increase connectivity to Cyprus, boosting the tourism sector

The plan involves 6.3 million euros that are to subsidize airlines flying to Cyprus. The assistance will span seven months, and will cover aircraft capacity between 40%-70%.

9. Advertising scheme with travel agents to attract tourism and promote Cyprus as a safe tourist destination

The scheme, amounting to 10 million euros, will focus on the creating of advertising campaigns to promote the island as a safe tourist destination.

10. VAT cuts for hospitality sector

In an effort to boost consumer demand for the hospitality sector, the government said it will be cutting VAT from 9% to 5% between July and January 10, 2021.

11&12. Extension of deadline for submission of tax returns

The deadline for the submission of tax returns was extended to the end of October, while any late fees imposed this year were scrapped.

13. Extension of deadline for submission of documents for Estia borrower relief plan

The government ordered a one-month extension for the submission of supporting documents for the Estia relief plan to July 31, while new applicants will be allowed to join by June 15.