OEB President calls for collective assessment of the Brexit impact on Cyprus

Christos Michaelides, President of the Cyprus Employers and Industrialists Federation (OEB), believes said Cyprus should collectively assess the impact on the local economy of the UK decision to leave the EU.

In an interview with CNA, Michaelides called for more practical measures to boost Cypriot business which, despite the return to growth after almost four years of recession, continue to face problems of reduced profitability and low turnover.

Following the leave vote in the UK referendum, OEB called on the Finance Minister to call a meeting with all public and private stake holders to assess the Brexit`s impact on the Cypriot economy. However many have suggested that it is too early to assess any spillover effect as the new trade relationship between the UK and the EU will require two years of discussions.

“Surely there are parametres that cannot be determined. Surely there is uncertainty with regard to the various elements but this is the essence of programming,” Michaelides replied.

He pointed out that some aspects of the Cypriot economy, like tourism, are linked to the fluctuation of the British pound against the euro.

“We can be sure that the decline of the sterling (compared to the euro) will affect tourism,” he said, adding that “ weaker sterling will affect Cypriot exports to the UK and could possibly lead to increased imports which in turn affects the trade balance.” Uncertainty will affect the yields of the Cypriot bonds trading on the international secondary markets, he explained.

He also said the leave vote may also have positive impact such as the inflow of companies rellocating from the UK in a bid to continue exploiting the benefits of the EU internal market.

“We don`t need to know precisely the impact but we have take into account the possible parametres, and plan accordingly. This is our view and that is why we insist that, as with every important issue, we need to work collectively to address any challenges,” Michaelides pointed out.

With regard to the Cypriot economy Michaelides praised the fiscal policy followed by the government, noting however that the real economy and companies continue to face “serious challenges.”

He recalled that Cypriot companies continue to face pressure challenges concerning their turnover and profitability, and called for practical measures such as the law on the scheme for social insurance arrears repayment scheme.

“We need to expand this scheme to cover taxation and VAT, we need practical measures and incentive that would assist the Cypriot corporations” he said.

The OEB President also said that the strict rules, imposed by the ECB on the Euro area banks in the context of the single supervisory mechanism, hamper investment which is crucial both in the EU and in Cyprus.

“This centralised approach and strict rules do not allow the attraction of investment,” he said.

Furthermore, Michaelides called on the Ministry of Commerce to reassess the model of business visits abroad organised annually, noting that this is not effective.

He said Cyprus should focus on 10 or 15 markets with organised presence there, BtoB meetings and a results-oriented approach.

Responding to the position raised by trade unions that wages should be restored to the pre-crisis level, Michaelides said reducing unemployment should be the primary concern, adding that this will not be achieved by increased wages.

“Wages growth should be connected directly the GDP and with productivity both in the private and the public sector,” he said.