Sponsorship of the Annual Economic Lecture of CES

The Bank of Cyprus sponsors the Annual Economic Lecture of the Cyprus Economic Society

Speaker: Dr. Loucas Papademos, former Vice-Chairman of the European Central Bank

In an effort to contribute towards the wider briefing of the economic and business community of Cyprus and assist in giving answers to questions which may arise under the circumstances of the current economic climate, the Bank of Cyrus has organized, in cooperation with the Cyprus Economic Society (CES) and the School of Economic Studies and Management of the University of Cyprus, the Annual Economic Lecture of the ECE. The Annual Economic Lecture forms an institution which started back in 1991 in view of contributing towards the dissemination of research mainly on economic policy issues. Many eminent economists of international repute such as Robert Solow, David Laidler and Christoforos Pissarides have spoken at the Annual Economic Lecture in the past.

Dr. Loucas Papademos, former Vice-President of the European Central Bank and former Governor of the Bank of Greece, was the speaker at this year’s organization of the Annual Economic Lecture with his speech entitled ‘Fiscal Policy, Growth and Stability in the European Union’.

The event which was also honoured with the presence of Mr. Charilaos Stavrakis, Minister of Finance, was prefaced by Messrs Vasos Siarlis, Higher General Manager of the Bank of Cyprus Group and Marios Clerides, Chairman of the CES.

In his speech, Dr. Papademos who was introduced by Mr. Athanasios Orfanides, Governor of the Central Bank of Cyprus, referred to the main causes of the fiscal crisis in Europe, the possible consequences on economic activity and financial stability, the challenges faced by the countries with fiscal problems and how the new regulatory framework of the European Union will help solve the crisis.

The main causes of the crisis depend on the size of fiscal deficits and the rise in public debt, the erosion of competitiveness and the high rates of credit expansion. He pointed out that a fiscal crisis is mainly the result of large fiscal imbalances and erosion of a country’s competitiveness. High and recurring fiscal deficits affect in their turn the financial markets with implications on financial stability.

When referring to fiscal policy, he stressed the importance of reducing expenditure in a consolidation programme and the need for reforms to improve competitiveness. He also stressed the need for political consensus for the successful implementation of a fiscal consolidation and reform programme.

When referring to the EU support framework, he argued that the powers of both the European Financial Stability Fund and the European Stability Mechanism which shall succeed it in 2013, should be expanded to allow greater flexibility of intervention in the secondary market.

Dr. Papademos also referred to the case of Greece rejecting the scenarios of the country’s exit from the euro zone stating that the official authorities of both Greece and the European Union have disagreed with such scenarios. He disagreed with the scenarios of a Greek debt restructuring because such a development would not have a positive outcome, it will bring about damages to the banking system, it would have a negative impact on other countries too and it distracts from the real causes of the problem.

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