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CYPRUS GOVERNMENT INTRODUCES SUPPORT PACKAGE TO BOOST ECONOMY

Posted by: exsusgroup
Category: Cyprus News

On the 27th May 2020, the Cyprus government introduced the new support package to further boost the economy, whereby the President of the Republic of Cyprus relayed the relevant decisions in his speech addressing the public, that very evening.

The above follows the European Commission’s proposal to offer EU member states EUR 500 billion in free grants and a further EUR 250 billion in repayable loans as part of a new coronavirus economic recovery plan. From this, Cyprus will be entitled to a total amount of EUR 2.520 billion.

The package includes a liquidity grant amounting to EUR 800 million for the financing of Small and Medium Enterprises, through the Cyprus Entrepreneurship Fund. The beneficiaries will be small and medium enterprises with maximum personnel of 250 per enterprise.

Additionally, for the purpose of providing loans to Cypriot small and medium enterprises and companies of medium capitalization, the Government has decided, in conjunction with the European Investment Bank, to increase the lending scheme by EUR 500 million euros. The beneficiaries will be enterprises which have been registered and are operating in Cyprus employing up to 3000 workers per enterprise.

Continueing with the above, he also relayed that the Council of Ministers has approved the participation of the Republic of Cyprus in the Pan-European Guarantee Fund, which has been set up to combat the consequences from the COVID-19 pandemic in the member states of the European Union. Cyprus is expected to draw an amount of EUR 300 to 400 million from this fund for the needs of the Cypriot economy. The beneficiaries will be Small and Medium Size enterprises and companies of Medium Capitalization, which have been hit by the pandemic. It should also be noted that the loans granted will be guaranteed by 80% by the Pan-European Guarantee Fund.

The President also pointed out that all lending schemes have clauses for the protection of employment positions. This encompasses an Interest Subsidy Scheme for new business loans to enterprises, including self-employed, who are facing a lack of liquidity as a result of the pandemic. It concerns loans which have been contracted or will be contracted as of 1st March 2020 up until 31st December 2020. The beneficiaries will be all of the enterprises and self-employed, under the basic requirement of not being considered problematic, on the basis of the definition by the European Commission.

The interest will be subsidised for 4 years. In the first two years, the interest will be subsidised by up to 3.5 percentage units, while in the third until the fourth year, the interest will be subsidised by 2 percentage units for Small and Medium Companies and 1.5 percentage units for large companies.

Furthermore, in order to support home ownership, the Council of Ministers has decided to subsidize interest for a specified period of time and for a fixed maximum loan amount. It concerns loans contracted or to be contracted as of 1st March 2020 until 31st December 2020 and does not exceed EUR 300 thousand euros. The duration of the subsidy will be four years and will amount to 1.5 percentage units of the interest ().

The Cyprus government also introduced a Subsidy Scheme for Very Small and Small Enterprises and Self-Employed. The aim of the plan is to cover part of the rent and the running costs. The total amount of the subsidy exceeds EUR 100 million euros. The grants concern 50,000 very small and small companies, who occupy up to 50 workers, as well as the self-employed.

The amount of the lump sum grant is distributed in a certain way, concerning the Self-employed and very small companies that had fully or partly suspended their activities and had joined the Special Schemes of the Ministry of Labour for the period 13th April until 12th May, which employed up to one person (EUR 1.250); from 2 to 5 persons (EUR 3.000); from 6 to 9 persons (EUR 4.000); and from 10 to 50 persons (EUR 6.000).

Moreover, Mr. Anastasiades also stated that in order to strengthen recovery, the Council of Ministers has decided to instruct all competent authorities to invite immediate tenders for all development works, based on the declarations of the President or and other works, which are ripe, regardless of the scheduled period of their declaration according to the state budget. It follows that the execution of the development works is not only suspended but also accelerated. Provided that exempt from the decision for the time being is the work concerning the building of the House of Representatives.

Also, for the purposes to strengthen the tourism sector and the connectability of Cyprus, a scheme for incentives amounting to EUR 6.3 million has been additionally decided, with which the existing scheme rises to a total of EUR 15.7 million to be paid until the end of the year. Also, in order to boost the sector of tourist accommodation and catering, the reduction of VAT has been decided from 9% to 5% for the period from 1st July 2020 until 10th January 2021.

In addition to the above, the President also stated that an amount of EUR 22 million will be available in order to support and strengthen the agricultural sector, as stated by the Minister of Agriculture.

The President reiterated the fact that the total amount of State grants for the safety of jobs, covering part of the running costs and rents for the self-employed and companies, stands or exceeds EUR 430 million euros approximately. At the same time, the possibility is afforded for drawing loans totaling to EUR 1.7 billion euros in order to strengthen liquidity, without taking into consideration the subsidisation of interest by the State for business and housing loans.

The above decisions reflect the determination that the Cyprus government has in order to support the restart of the Cypriot economy. In his speech, Mr. Anastasiades, referred also to the first package of measures that were taken in March 2020, that amounted to a total of EUR 1.2 billion.

In closing, the President emphasised once more, that we should all act with caution, as he stated that “I shall not tire of reiterating that any progress or the risk of going backward depends on the behaviour of all of us” and that we should “continue to show humanism and solidarity, observe the scientific safety and health instructions in this way respecting the protection of ourselves and of society as a whole”.

 

Source Sinka LLC

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