Harris Georgiades - Minister of Finance, Republic of Cyprus HARDtalk

road. Bail was set at $2,500. Now on BBC News it's time for

HARDtalk. Work and HARDtalk. When Harris

Georgiades became finance minister of Cyprus in 2013 some said he had

been handed a poisoned chalice. He has had to preside over tough

austerity measures that are driving up poverty levels in the country.

The economy is shrinking, unemployment will perhaps reach 20%

this year and wages are being slashed. These were the tough

conditions of a ten billion euro bailout granted last year with the

troika of the European Central Bank, the EU and the IMF to avoid a

collapse of the banking system in Cyprus. So why then does the finance

minister believe that the economy is proving more resilient than

expected? Is he being too optimistic?

Harris Georgiades, welcome to HARDtalk. Thank you. It is nearly a

year since you were appointed finance minister. Were you handed a

poisoned chalice? The economy was left in a grave situation. We

received it as a newly elected Parliament. We received the crisis

of unimaginable proportions. Unfortunately, I think those grave

dangers are already behind us. Maybe I do sound overly optimistic, I am

not. I think I am being realistic. So, those grave dangers are behind

you? Some estimates say unemployment could reach more than 20%. You have

negative growth, -5% for this year. The health public wages and others

being slashed by as much as 25%. -- you have. Are you being too

optimistic? We are facing the risk of a total collapse in the economy.

The collapse of the banking system. Exit from the eurozone, even from

the EU, somewhat speculating. Those dangers, we have overcome them. A

few weeks ago, the IMF will today whole range of indicators. All they

said was that you were facing a slump over the next ten years. You

will be facing a decade of these conditions. I do not think so. The

IMF itself has revised its assumptions upwards. I hope I am

being very honest. Revised upward? They said it would be negative

growth of -7%. They have brought that up. They said -9, it is now

-6%. I am not saying it is a good performance, obviously. The economy

was seen as in great danger. We had the threat of a total collapse.

Since then, we have stabilised the situation. Some difficulties remain,

like unemployment. It is not really a new situation. It is very

important. We saw the protests over austerity measures. The IMF has said

that political support for the troika's programme is diminishing.

97% of the Cypriots economy, people thought that the economy was in bad

shape. They said it was headed in the wrong direction. You are saying

it is getting better. You spoke of unrest, there is none of it. In

Cyprus, we have not seen anything like the Labour action we have seen

elsewhere. There was not a day of strike. The capital is very

understanding of the situation. The population say the country is headed

in the wrong direction. It would not sound as though they have a huge

amount of confidence in what you were doing. We are trying not to

look at the polls. Since you are speaking about the polls, we are

doing well. The government and government policy are doing well

with the public. We have been able to get legislation relating to the

foreign programme through Parliament. We have had no delays.

Already, I think we are able to see results. Do not take my word, we

have had the first upgrade. You are in a terrible mess. Overexposure to

Greek debt in banks. We have had the first upgrade from a ratings

agency, standard and Poor 's, in the past three years. We have been

receiving downgrades for years. So you have moved up to be minus? You

feel that you are moving up. It is what led the finance minister in

France to say that Cyprus is a casino economy on the brink of

bankruptcy. Do you accept that your problems were of your own making?

Not you specifically, but the authorities. The problems are local,

I have two admit that. Other European leaders said things about

the economy. I will make honest admissions. The problems of the

Syrian economy -- Cypriots economy are the result of our own decisions,

our own failures. As far as public finances are concerned, and also

banking. We are acknowledging that the problems, it allows us to take

control of the situation and explain to the public that we are fixing the

problems. When the finance minister at the time said that it is always

striking that a country with a relatively small population attracts

high bank deposits from foreign investors. This model is bankrupt.

We did have an oversized banking system. The smaller the economy, the

banking system will be larger compared to the population. If the

two Iceland and Ireland. We already have a much smaller banking system.

Already, it is a better banking system. Better regulated. Better

regulated you say. I have to put it to you. These high levels of Russian

deposits, Russian money. There were some kind of money laundering going

on. This is what was being said. Russian authorities say all the

money they put in Cyprus was clean. Part of the ruling coalition in 2012

cents, we can not use taxpayer money to guarantee the deposits of illegal

Russian money in Cypriots banks. Was the money-laundering in Cypriots

banks? We want to clear a man once and for all. We are going to audit.

Both by the European institutions, and an independent firm they were

looking to how we are implementing regulation. They will offer opinion.

It is an opinion that was represented at Europe. It is not

verified. However, many shortcomings, and there are

shortcomings when it comes to money laundering, are beyond us. It does

exist. It is a global problem. We are determined to do what is

necessary. It has been so thoroughly investigated. We have taken action.

So you have done a restructuring, you admit you need a better system

to restore confidence in Cyprus and outside in your banking system. Do

you really think you are making a good job of that? We have this

highly publicised row between the governor of the central bank in

Cyprus and the President. The President even tried to get the

governor removed from his post. That does not look good, it does not

restore confidence in the banking system, does it? I will say this,

there is an issue regarding the role and responsibility of central banks.

Before, we had no interest in central banks needing to be

independent and acting independently, . The authority of a

central bank should not be in the hands of one person. There should be

checks and balances, they should be... Of course. I was asking you,

there is a big row, a dysfunctional relationship between the President

and the head of the central bank. As one of the arms of Cyprus's battle

system, is that a situation that is viable? We are trying to handle the

situation. We are looking at the issue, not a personal basis, but an

institutional basis. There needs to be accountability and transparency,

especially when it comes to such an important area. Should he resign? I

am a 20 get into the discussion. There is an investigation by an

independent prosecutor. I will not comment. Very quickly, on this

matter, one of the areas of disagreement is lifting the controls

on transfers of funds from Cyprus. When will that happen? With a lid

might happen early this year. We have an agreed roadmap between

ourselves and Cyprus. This roadmap, if we are to translate it into a

timeframe, most of the restrictions would be gone by this year. That is

our objective. That is our stated objective. We want the regulations

to go by springtime. The last on the list will be the transfer of funds

abroad, a simple transfer. We will wait for that announcement. Wouldn't

it be nice if Cyprus could commercially risk -- exploit those

energy reserves offered shores. It will help Ulster your budget,

wouldn't it? Something like $800 million. You would like that money,

wouldn't you. Week you know how much we are counting for a dare. This is

good. We will do whatever else is necessary to fix the economy, to

make it more competitive, better functioning and these energy

prospects will be another. It will be very different. It is huge and

important. It is not a substitute to real economic reform, and fiscal

change. Looking at that change. Looking to the future, you said you

said energy is being pursued in a decisive manner. To maybe have it

licensed out to a number of potential gas fields offshore.

Having the first exploratory drilling is and they have been

successful. There will be more sick -- exploration this year. There is a

timeframe is very promising and which really needs to be able to

offer an economy. You said about a ten year slab. I do not agree. We

could be one of the fastest economies in the European Union. You

could be right. I do not write about upsetting Turkey? The self-declared

Republic of North Cyprus. The -- declared in 1983. Only recognised by

Turkey. Are you not worried about upsetting Ankara? It said any gas

exploration in the sea waters should be undertaken by both committees.

The Foreign Minister has warned your government, the Cypriot authorities

are on adventurous policies in this regard. You have resonated threats

buy the Turkish government. I don't think any EU member state should bow

to threats. You will fully agree that these prospects and the other

prospects relating to the prosperity and progress of South Cyprus should

be shared with all of the people. We have the strongest incentive of

anyone to resolve the problem of the division of Cyprus so the fruits of

our economic to mail -- development will be shared. As you have said,

regrettably, so many years Turkey maintains 35,000 troops and they are

the reason why this prospect for a common future have not yet been

realised. Are you not worried about upsetting them? What is your legal

right to do? Is always the best route, is it, if you end up in

raging Turkey? Nobody is comfortable when they are being threatened but

nobody thinks about these threats that are completely un- founded,

legally or morally. We are a member of the European Union. The gas

fields have been licensed to international corporations. We are

working very well with other neighbours in the region, Israel,

Egypt's, London on we share the common natural resources. --

Lebanon. We shall proceed. Economic, doesn't it make sense for

you to do this with the cooperation of Turkey? A pipeline to Turkey into

Turkey would be the easiest way for you to get this and the oil out

rather than be confined. Economically it make sense for you

to do this. Turkey is one of the biggest economies in the world.

Until recently, a very dynamic economy. Everybody is thriving to

access to this big market. We are immediate neighbours to Turkey and

we have no access to this market. Cypriot ships cannot access... What

is the point of upsetting Turkey? What I am trying to say is I agree

that the prospects of corporation, of trade are enormous but how can we

discuss the possibility of exporting gas or oil through Turkey when

ships, merchant ships with a Cypriot flag, cannot even access Turkish

cities. When there is no connection, flights between Cyprus and Turkey.

Let's start from the basics. C acts and not only words on the part of

Turkey and we fully agree that cooperation would be best for the

region as a whole. The question is this, will these new-found reserves,

they can either in -- inflame or solve the Cyprus problem.

Reunification. The Turkish energy minister said that energy is

produced in other parts of the world, here it will be a force for

peace. We will make sure it is a force for peace and that is why we

are cooperating with our neighbours, or the original actors

and we hope that Turkey is able to join in this regional cooperation

not only regarding energy but on other issues. What about the talks

to try to reunify the two parts of Cyprus, the Republic which is

recognised by everyone and the self declared Turkish part. You are

working in a confederation. You want a joint declaration before you can

even start talking. Why is the joint declaration so important? It is a

small but important test that we are indeed in agreement at least as far

as the objective. There is no point trying to negotiate when nobody

agrees with the objective. You said the objective is to have a

federation. One state but with two federal zones. With significant

autonomy on day-to-day issues. It is alarming that the Turkish city

leader will not utter a word of federation. That is the reason

why... White-matter your promise is sovereignty as well, they say the

Turkish Cypriot leader say that the two sides must drop the exchange of

documents and start talks on an agreement. You asking for an

addition to that. We need to verify and agree on the objectives. If one

wants to go right in the other wants to go left, there is no point. He

says he is ready for a deal on political equality, are you ready to

give him that? Of course, of course, definitely. Within the framework of

a federation and the legal sovereignty that we have mentioned.

That is not an unreasonable thing to ask. The important thing is to get

together and talk. There is no state in the world without single

sovereignty. I don't think is is an obstacle. It is an absolutely

necessary precondition if this will succeed. We want to be a member of

the European Union after the solution. These are the

fundamentals. In October we are going to be talking by Christmas,

you are overoptimistic. One everything. This as well as the

economy. We are facing challenges and we have a vision. The vision is

to transform Cyprus and turn it into a island of stability. Cyprus is an

excellent place to live, spent holidays and invest and this will be

to the benefit of the region. Thank you very much for coming on

HARDtalk. More warnings are in force of the

day ahead,