Considerations on COM(2014)118 - Amendment of Implementing Decision 2013/463/EU on approving the macroeconomic adjustment programme for Cyprus

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dossier COM(2014)118 - Amendment of Implementing Decision 2013/463/EU on approving the macroeconomic adjustment programme for Cyprus.
document COM(2014)118 EN
date March 24, 2014
 
table>(1)Regulation (EU) No 472/2013 applies to Member States already in receipt of financial assistance, including those from the European Stability Mechanism (ESM), at the time of its entry into force.
(2)Regulation (EU) No 472/2013 sets the rules for the approval of macroeconomic adjustment programme for Member States in receipt of financial assistance, which rules need to be consistent with the provisions of the Treaty Establishing the ESM.

(3)Upon a request of 25 June 2012 by Cyprus for financial assistance from the ESM, the Council decided on 25 April 2013 by Decision 2013/236/EU (2) that Cyprus was to rigorously implement a macroeconomic adjustment programme.

(4)On 24 April 2013 the ESM Board of Governors decided to grant, in principle, stability support to Cyprus and approved the Memorandum of Understanding on Specific Economic Policy Conditionality (hereinafter referred to as the ‘MoU’) and its signing by the Commission on behalf of the ESM.

(5)In accordance with Article 1(2) of Implementing Decision 2013/463/EU (3), the Commission, in liaison with the European Central Bank (ECB), and, where appropriate, with the International Monetary Fund (IMF), has conducted the third review to assess the progress with the implementation of the agreed measures as well as their effectiveness and economic and social impact.

(6)As a result, Implementing Decision 2013/463/EU should be updated in the areas of financial sector reform, fiscal policy and structural reforms, in particular with regard to (i) the design of a communication strategy by a joint Central Bank of Cyprus (CBC) and Ministry of Finance task force on the roadmap for the relaxation of the capital controls and on the implementation of the banking sector strategy; (ii) the timely reporting of banks’ estimates of the potential impact of the newly introduced and upcoming Union rules on capital requirements and non-performing loans (NPLs) on capital, profitability and coverage ratio; (iii) the establishment of a task force to assess the magnitude of registered but untitled land sales contracts, and to provide recommendations on this issue; (iv) the reform of corporate and personal insolvency procedures; (v) the review of the Civil Procedure Code and Court Rules to ensure a smooth and effective functioning of the revised foreclosure and insolvency frameworks; (vi) a revision of the primary deficit target for 2014 to 1,8 % of GDP; (vii) the implementation of a first stage of the National Health System (NHS), having first defined and adopted a full roadmap to NHS; (viii) the revision of policies on pricing and reimbursement of medical goods and services, including those related to pharmaceutical expenditure; (ix) the establishment of a Privatisation Unit; (x) the presentation of an action plan for addressing the shortcoming identified in Phase 2 of the peer review by the Organisation for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes; (xi) the development of a growth strategy based on Cyprus’ competitive advantages to help the Cypriot authorities to kick-starting the economy. The implementation of comprehensive and ambitious reforms in financial, fiscal and structural areas should safeguard the medium-term sustainability of the Cypriot public debt.

(7)Throughout the implementation of Cyprus’ comprehensive policy package, the Commission should provide additional policy advice and technical assistance in specific areas. A Member State subject to a macroeconomic adjustment programme experiencing insufficient administrative capacity is to seek technical assistance from the Commission, which may constitute, for that purpose, groups of experts.

(8)The Cypriot authorities should seek the view, in accordance with current national rules and practices, of social partners and civil society organisations in the preparation, implementation, monitoring and evaluation of the macroeconomic adjustment programme,