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ΠΕΡΙΟΔΙΚΟ
ΚΛΕΙΣΤΟ ΕΝΤΥΠΟ
ΑΔΕΙΑ ΑΡ. 133
ΤΑΧΥΔΡΟΜΙΚΟ
ΤΕΛΟΣ ΠΛΗΡΩΜΕΝΟ
ΑΔΕΙΑ ΑΡ. 239
No
117DECEMBER2014
AccountancyCypruswww.icpac.org.cy
The Journal of the Institute
of Certified Public Accountants
of Cyprus
One step
at a time

1ACCOUNTANCY CYPRUS • VOLUME 117 • DECEMBER 2014
President’s Address
Ioannis Charilaou
President
Institute of Certified
Public Accountants
of Cyprus
Dear colleagues
First of all I would like to wish everyone a happy
New Year and I surely hope that 2015 will stand
equivalent to our expectations for health, pros-
perity and happiness.
Undoubtedly, 2014 was a very challenging year.
Cyprus economy is still struggling to recover in
the midst of the programme agreed with Troika.
The developments in Ukraine and Russia affected
the international business of the country, whilst
local economic activity still remains at low flights.
The banks still remain very careful with their mon-
ies and, at the same time, interest rates haven’t
exhibited the much desired drop, in order to re-
fuel the economy with fresh money.
The geopolitical developments around Cyprus
also pose as a challenge, the outcome of which
will most probably have an impact on the country.
2015 will not be paved with rose pellets, on the
contrary, it is estimated that it will also be a tough
year for the economy and the society of Cyprus.
To mitigate this risk, it is imperative for the gov-
ernment and the parliament to work together in
order to rectify ill practices, rationalise the public
service and make its activities more efficient and
effective. It is also of supreme importance to pre-
pare well for those changes that will hit out door,
such as OECD developments (eg BEPS project),
the Russian De-offshorisation law, enhanced an-
ti-money laundering framework etc.
As an Institute we did our best to assist the gov-
ernment in many areas, such as handling various
taxation issues including the double tax treaties
mechanism and the exchange of information
with other tax authorities. We had serious input
in the modernisation of the Registrar of Compa-
nies and in the drafting of many bills including,
inter alia, the insolvency framework. We had met
and cooperated with Troika during the past year
in a number of occasions and we are in line with
the action plan regarding the improvement of the
anti-money laundering framework. In addition, we
contribute a lot to the transposition of EU Direc-
tives and Regulations into Cyprus law. We have
raised our voice both towards the officials, but
also to the public in order to pass our messages,
becoming thus more visible, always though within
the professional standards we want the Institute
to stand. Although we might have not been al-
ways successful in passing our views, I am confi-
dent that our messages were properly conveyed
and will be sought after in the future.
During 2014 we have kept intact all the existing
supportive services to our members and addition-
ally enriched the menu of the services offered in
order to cover a wider span of their professional
activities. Such support covers tax services, IFRS
and auditing support, compliance services, training
and other technical information, all at the minimum
possible cost, whilst keeping our Institute fees
and subscriptions at the same level for years now.
The Institute absorbs a significant cost for offering
many of the above services for free to its members.
We have also invested in the technological up-
grade of the Institute in order to provide better
internet services and information. We have also
enhanced the anti-money laundering mecha-
nisms and developed a new AML monitoring tool,
designed to encompass a risk based approach
concept.
As an Institute, we are committed to improve
the quality and extent of services offered to our
members and will definitely continue doing it. The
Council is currently considering further benefits
and services that will be made available to the
members in 2015.
Amidst these very challenging and demanding
times, the Council, the management and the
committees tried their best in order to present a
constructive, useful and optimistic outlook. We
have worked hard in order to meet the various
deadlines and bring about various other duties,
coupled with new obligations dictated by Troika
and the MoU. During the year, the Institute ap-
peared numerous times before the Parliament to
discuss bills and proposed legislation, convened
with government officials and various depart-
ments for on-going matters that relate to our pro-
fession and the economy in general and availed
significant resources to this end.
Dear colleagues,
As I already mentioned, we have another difficult
but challenging year ahead of us. Things will not
be easy. We will work tirelessly and diligently in
order to revive the distressed Cyprus economy.
Cyprus is an international business centre and
can thrive as a credible one, provided we are
goal congruent and methodical, and adapt to the
new conditions fast. In the horizon one can notice
some positive signs, eg the recent stress test re-
sult of the systemic banks, the upgrading of the
economy by international credit rating agencies
and the current state of the implementation of
the MoU. We have to build on these indications.
We remain optimistic and we are certain that the
resilience and pride of the Cypriot people shall
overturn the situation sooner.
Concluding, I would like to extend my warmest
thanks to all the members that participate at the
committees, the management and staff of the In-
stitute and my colleagues at the Council for their
hard work, commitment and unselfish contribu-
tion. Most importantly, I would like to thank all of
you, the ICPAC members, for your understand-
ing, support and contribution towards the goals,
values and growth of our Institute.
Once again, I wish you all the best for the New
Year.

2 3ACCOUNTANCY CYPRUS • VOLUME 117 • DECEMBER 2014 ACCOUNTANCY CYPRUS • VOLUME 117 • DECEMBER 2014
The Institute Council
President: *Ioannis Charilaou, FCCA, FAIA, MBA
Vice President: Nicos Chimarides, ACA, BSc
Secretary: *Demetris Halios, BSc(Acc), CPA, ΜΒΑ
Contents
Economy
P.20 Views of the Cyprus Chamber of
Commerce and Industry on the
economy as expressed during the
Annual general meeting of 2014
P.22 The Return of Cyprus in the
International Capital Markets
A Historic Day
P.24 Norway-type Fund for Natural Gas
with Escrow Account for Turkish
Cypriots
P.26 The Way Forward: Work with the
Troika - Aspire for Growth
P.28 EU launches Investment Offensive
to boost jobs and growth
P.29 The Public Finances and the
Reactivation of the Economy
P.30 Laiki and the European Central
Bank in the New York Times
P.31 Skill set needed to make Cyprus a
Strong Fund Jurisdiction
P.32 Structural reform and the Cyprus
economy
P.34 Rethinking our economic Future
P.36 The amendment of the Law
containing foreclosures of
mortgaged property is imperative
P.38 Borrowing to spend and quality life
P.40 Decisions of the Council of
Ministers of the Republic of Cyprus
and the power to promulgate them
by publication
P.42 2015: What would it be like?
P.43 Banks should handle their
customers in a professional and
humane manner
P.44 Tax amnesty and real estate
P.46 Corporate Governance Practices of
Cyprus Companies listed in the
Cyprus Stock Exchange
Members:
Panicos Charalambous, FCCA
Christis Christoforou, BA(Econ.), FCA, MBIM
Christos Vasiliou, FCA, BA(Econ.), CF
Pieris Markou, BA, FCA, CTA
Stavros Pantzaris, B.Eng., FCA
Maria Pastellopoulou, FCCA
Philippos Raptopoulos, FCCA
*Marios Skandalis, FCCA, CFC, CFE
*Demetris Taxitaris, ACA
Elias (Liakos) Theodorou, FCA
Demetris Vakis, FCA, BSc, CF
*Denotes member not in practice
Business
P.50 Major changes in the energy
markets
P.51 Water Management: ‘Mapping the
Cost of Non-Europe 2014-19’
P.52 Bureaucracy puts the brakes on
investment We need simpler and
clearer procedures,and to escape
current mentalities
P.53 EU energy policy towards 2030
P.54 Cyprus shipping chamber
“For 25 Years it Navigates Cyprus
Worldwide, carrying messages of
Social Solidarity”
P.56 European Cooperation Helps
Public Authorities Support
Corporate Social Responsibility
P.57 Energy updates
P.58 A critique to the formula used by
the Ministry of Energy, Commerce,
Industry and Tourism to estimate
the “reasonable” level of petroleum
products’ prices
P.60 Cyprus Hydrocarbon Discoveries:
Learning how to manage our
newly discovered wealth for
sustainable economic growth and
social development
P.62 Amendments to the trust r
egulation regime consolidate
Cyprus’s attractiveness as an
international business centre and
trust jurisdiction
P.64 The AIFMD and what it means to
you
P.66 Transparency in Corporate
Reporting
P.68 Retiring in peace?
P.70 The different types of decisions
of managers
P.72 Reading People Like A Book:
mastering the art of understanding
people
P.74 Intermarket Analysis A guide to
investing
P.76 Re-thinking approaches to
business behaviour
Contents
December 2014 – No. 117
ISSN 1450-2380
Editor
Ninos Hadjirousos, FCA
Deputy Editor
T. Anastasiades, B.Sc., M.A. (Econ.)
Editorial & Institute Offices
11 Byron Avenue, CY-1096 Nicosia
P.O.Box 24935
1355 Nicosia – Cyprus
Tel. 22870030, Telefax 22766360
E-mail: info@icpac.org.cy
URL:http://www.icpac.org.cy
Accountancy Cyprus is pub-
lished quarterly by the Institute of
Certified Public Accountants of
Cyprus and is sent free to all mem-
bers of the Institute as well as to
a large number of other persons,
companies and organizations.
The Institute can accept no re-
sponsibility for the accuracy of
contributed statements or articles
appearing in this publication and
any views or opinions expressed
are not necessarily endorsed by
the Institute, its Council or by the
Editors.
Institute News
P.4 Council’s Activities
P.6 Commitee’s Activities
P.11 New Members
GM’s corner
P.12 Think’n ahead
Professional Briefing
P.14 FEE Members’ Assembly elects
Petr Kriz as President and
Edelfried Schneider as Deputy
-President for 2015-2016
Interview
P.16 MARIOS CLERIDES,
GENERAL MANAGER of the
Cooperative Central Bank
Auditing & Accounting
P.78 IFRIC 21 – Levies
P.80 Significant changes in banks’
financial statements under new
accounting standard
Taxation
P.82 Implementation of FATCA in
Cyprus
P.84 From eggs to BEPS
THE EVOLUTION OF IMPOSING
AND TAX COLECTION
P.86 The Definitive Guide to Solving
VAT Problems
Fraud
P.88 The Dawn of the 4th European
Union (EU) Anti Money Laundering
(AML) Directive
P.90 Fraud is getting ‘younger’
Real Estate
P.92 Champions of Cyprus Property
Investment
IT
P.94 Cloud Computing
P.96 Digital Certificates
How usefull are they?

Institute News
ICPAC President at the IFAC annual general meeting in Rome
The President of the Institute Mr Ioannis Charilaou attended the IFAC annual general meeting which took place on
7/11/2014 in Rome, representing ICPAC.
With the outgoing President of IFAC Mr Warren Allen With the new IFAC President MS Olivia Kirtley
New website
For ICPAC
The Institute proudly launched its
new website in November 2014.
The new site replaced the previous
one and can offer much more in-
formation, assistance and service
to the members and the public. It is
endeavoured to be used as a useful
tool for the members and students.
The domain remains the same
www.icpac.org.cy
Council’s Activities
During the final quarter of 2014 the Council of the Institute convened three times and addressed various matters that were of
significant interest to ICPAC and to the profession in general. It had been a particularly busy period and the main activities of the
Institute included the following:
Meetings with Officials
The President, Council Members and the General Manager
during the fourth quarter of 2014 held the following meetings
with Government, political, business and other officials:
• On 3/10/2014 Council Members met with officials from the
Ministry of Finance to discuss issues of economic progress and
development.
• On 23/10/2014 a delegation from the Council, the Tax and
VAT committees participated in a meeting with IMF and repre-
sentatives from the Taxation Department to discuss the pro-
posals for the set-up of the large tax payers unit.
• A delegation from the Institute, as appointed by the Council,
participates in the team summoned by the Minister of Finance
for the review of the current tax policy framework. The kick off
meeting was on 3/11/2014 attended by the General Manager.
• The President of the Institute attended on 7/11/2014 the
Annual General Meeting of the International Federation of Ac-
countants in Rome.
• The General Manager with the Chairs of the Shipping Com-
mittee and Auditing Standards Committee met with the Deputy
Director of the Department of Merchant Shipping to discuss
upon specific matters for the submission of declarations under
the tonnage tax regime.
• On 14/11/2014 the General Manager met with IMF repre-
sentatives to discuss issues of the profession and of the econ-
omy of the country in general.
• The General Manager and the Chairs of the International
Business Committee and Company Law Committee met with
officials of the Ministry of Energy, Commerce, Industry and
Tourism to discuss the current situation at the Department of
the Registrar of Companies and be informed of the next mea-
sures that will be taken in order to enhance the efficiency of the
department.
• On 17/11/2014 the General Manager and senior officers of
the Institute had a teleconference with the Troika unit responsi-
ble for the quarterly assessment of the Institute on anti-money
laundering procedures.
• The President and the General Manager of the Institute vis-
ited on 6/12/2013 the Attorney General to discuss issues of
mutual interest.
• The General Manager on 9/12/14 met with the new ACCA
Director for Europe Mr Andrew Leck, on his first visit to Cyprus.
• On 17/12/2014 the General Manager attended the Statu-
tory General Assembly of the European Federation of Accoun-
tants (FEE) in Brussels.
• The General Manager met with ACCA officials in London in
18/12/2014 in order to discuss and finalise the new regula-
tory tool that will be introduced early in 2015 for the review of
rules and regulations / anti money laundering procedures of
the practising firms.
Council’s Decisions
During the quarter, the Council took (inter alia) the following
key decisions:
• To support the Ministry of Finance in the formulation of a
revised tax framework. To this end the Council nominated its
representatives to the specific team that was set-up by the
Minister of Finance.
• The creation of a new committee, namely Chief Financial
Officers Committee (CFOs) in order to cover the specific niche
of the industry and of the professional activities of professional
accountants. The new committee will be announced in January
2015.
• Due to the increasing concerns about the issues of auditors’
independence and networks, the Council appointed a subcom-
mittee to thoroughly examine this issue. The subcommittee
met a number of times and the concluding proposal will be
delivered within the first quarter of 2015.
• In order to enhance better communication with the commit-
tees and to bring the council and the committees closer to-
gether, the Council has decided to invite at its meetings from
November 2014 onwards a committee chairman to present the
targets and work performed by the committee.
Other important meetings and activities
• The Council of the Institute met with the newly appointed
chairmen of the Institute committees on 29/10/2014.
• The President of the Institute held a press conference on
27/11/2014 on the occasion of the signing of the law con-
cerning de-offshorization in Russia, explaining the details of the
law and how this will affect Cyprus.
• The General Manager participated as a presenter in the Ca-
reer Fair 2014, held on 29/11/2014, presenting ICPAC and
the prospects of the accounting profession to prospect stu-
dents.
• Institute officials participated in meetings with other stake-
holders for the treatment of the sanctions imposed by Euro-
pean Union on Russia due to the events in Ukraine.
• Ms Lina Lemessiou, Senior Officer of the Institute, partici-
pated in a number of workshops and meeting in Brussels re-
garding the Accounting Directive and Audit Policy Reform in
the respective committees of FEE.
• During the quarter the Council members and the General
Manager met with officials of the Ministry of Energy, Com-
merce, Industry and Tourism, the Ministry of Finance, the Pub-
lic Oversight Board and other government bodies.
• The General Manager attended a number of meetings with
the other competent authorities for regulating the administra-
tive service providers and for anti-money laundering activities,
to go over current matters of concern.
• During the quarter, ICPAC representatives appeared before
Parliamentary Committees regarding a number of Laws and
Bills, as well as met with government officials to convey the
Institute opinion on various pieces of legislation, such the Insol-
vency Framework.

CORPORATE GOVERNANCE, INTERNAL AUDIT AND
RISK MANAGEMENT COMMITTEE
A new Committee was formed during the fourth quarter of
2014, with the election of Tryfonas Kyriacou and Marianna
Neophytou to the positions of Vice Chairman and Secretary
respectively. The action plan of the Committee for the two-
year period 2014-2106 was agreed during the first meeting
of the Committee and was submitted to the Institute’s Coun-
cil for approval.
The Committee’s members have significant experience in
both the profession and industry, covering all three areas
addressed by the Committee. This gives the Committee a
good basis to focus on all three areas during the two-year
period. The Committee will aim to provide relevant informa-
tion to ICPAC’s members on recent developments on Corpo-
rate Governance and Internal Audit and address the concept
and issues associated with Risk Management.
The Committee is currently looking at the new Directive
to Credit Institutions on Governance and Management Ar-
rangements and will aim to provide further guidance to
ICPAC’s members with reference to the three areas covered
by the Committee.
The article on the survey on Corporate Governance on listed
companies in Cyprus, carried out and written by the previous
Committee members, is included in this issue of Accoun-
tancy Cyprus.
George Hadjineophytou
Chairman
Special Corporate Law Committee
ICPAC’s special Corporate Law Committee met twice since
appointment in October 2014. The Committee was asked
by ICPAC council to provide comments on the proposed
changes to the Cyprus Partnership and Business Names
Law (Cap.116). The Committee considered the proposed
amendments and prepared a letter with its remarks and
comments which was subsequently submitted to the Minis-
try of Industry, Commerce, Tourism & Energy (MICTE). Also
in November, the committee chairman attended together
with other ICPAC representatives a meeting with MICTE offi-
cials to discuss the progress made on the action undertaken
by the Government for the simplification of the procedures
relating to the operation of the Office of the Companies’
Registrar and Official Receiver.
Petros C Petrakis
Chairman
ECONOMIC CRIME AND FORENSIC ACCOUNTING (ECFA)
COMMITTEE
The new ECFA committee was appointed by ICPAC in Sep-
tember 2014 and during the last quarter of the year the com-
mittee began immediately to publish the planned e-bulletin
for December 2014. Thus the committee will publish the
volume 5 issue 3 of the quarterly e-bulletin which will be
sent to the members registered in the ECFA – Special Inter-
est Group (ECFA-SIG) and also from the new year it will be
published in the new website of ICPAC. This new issue will
address topics of all over the world and will also address the
current money laundering issues in Cyprus.
Furthermore in the current issue of Accountancy Cyprus,
two members of the ECFA committee will write an article
on fraud relating to younger people, a study conducted by
KPMG in the UK. The article, amongst other things, sug-
gests that the profile of fraudsters shifts from rogue senior
executives to younger individuals seeking to fund extrava-
gant lifestyles.
The ECFA committee in cooperation with the Educational
committee and ICPAC is planning to organize seminars re-
garding money laundering and fraud. Some of the topics
suggested are fraud prevention and detection techniques,
fraud risk assessment, bribery and corruption.
Also the action plan of the committee for the period from
2014 to 2016 was agreed and submitted to the institute’s
council for approval.
Serghios Savvides
Chairman
Limassol-Paphos Coordinating Committee
During the period from 1 October 2014 to 31 December
2014 the Limassol-Paphos coordinating committee has car-
ried out the following activities:
1. On the 16th of October the committee coordinated the
seminar “Recent changes to the Cyprus tax legislation”. The
seminar was held at Carob Mill in Limassol.
2. On the 4th of November the committee coordinated the
seminar “Immovable property tax and Capital Gains Tax”.
The seminar was held at Carob Mill in Limassol.
3. On the 6th of November the committee coordinated the
seminar “VAT –reverse charge mechanism”. The seminar
was held at Carob Mill in Limassol.
4. On the 2nd of December the committee coordinated the
seminar “AML Risk Based Approach and the role and duties
of the compliance officer”. The seminar was held at Carob
Mill in Limassol.
5. On the 12th of December the committee coordinated the
seminar “Audit monitoring visits and common deficiencies
encountered”. The seminar was held at Carob Mill in Limas-
sol.
6. On the 13th of December the committee together with
Committees’ Activities the radio station “Kanali 6” coordinated a blood donation.
7. On the 16th of December the committee coordinated the
seminar “High quality and efficient small company audits”.
The seminar was held at Carob Mill in Limassol.
8. During the Christmas period the committee visited the
“Limassol Home for Children” giving a donation of €1.000.
Ioanna E. Nicolaides
Chairman
Larnaca – Famagusta Co-ordinating
Committee
During the period from 1 October 2014 to 31 December
2014 the Larnaca – Famagusta Co-ordinating committee
carried out the following activities:
1. On 28 November 2014 the committee together with the
educational committee co-ordinated the seminar ‘AML Risk
Based Approach and the role and duties of compliance of-
ficer’ at Palm Beach Hotel.
2. During December the committee organised some events
and will donate €1.000 to charity foundations. The money
was given by ICPAC.
Andri Andreou
Chairman
Auditing Standards Committee
The Auditing Standards Committee (the “Committee”) was
appointed on 1 October 2014 and had its first meeting on 20
October 2014. During the period from 1 October 2014 to
11 December 2014 it performed the following tasks:
1. During its first meeting, subcommittees were formed in
order to follow up continuously subjects deriving from its ac-
tion plan and terms of reference. The following tasks were
assigned to the subcommittees:
a. Review all the circulars issued by the Committee in prior
years in order to assess whether there is requirement for
revisions to the existing circulars.
b. Continuous review of the current and future develop-
ments, changes or amendments in Auditing Standards and
other relevant issues published on the website of IFAC with
the main objective to present them to the Committee for dis-
cussion and issuance of relevant circulars to the members
when this is deemed necessary.
c. Review of the revised and new International Standards
on Auditing (“ISAs”) relating to the new Audit opinion effec-
tive for the accounting periods ending on or after 31 Decem-
ber 2016 (ISAs700, 701, 260, 570, 705 and 706). The aim
is to issue promptly a revised booklet with the Audit reports
specimens based on the revised ISAs.
d. To assess the need of issuing revised specimen letters of
engagements in light of the forthcoming revised ISAs, which
will be shorter than the existing and will include:
i. a cover letter,
ii. Details of the services to be provided to the client and the
responsibilities of the client,
iii. Terms of business and definitions.
2. Following relevant inquiries from the management of
ICPAC, the Committee has examined and replied to ICPAC
on the following matters:
a. The need for consistency on wording in an audit report
with an emphasis of matter paragraph, as to the ability of the
Company to continue as a going concern. The reply of the
Committee was based on ISA 570 “Going Concern”.
b. The audit report regarding Auditor’s duty of Care to Third
parties (other than the shareholders as a body).
3. The Committee is examining the effect that the new leg-
islation passed recently for ICIS and UCITS may have on the
audit reports, with the aim of issuing specimen audit reports
for ICIS and UCITS.
4. The Committee, represented by its chairman, together
with the management of ICPAC and the chairman of the
Shipping working group, reached to an agreement with the
Department of Merchant Shipping for the revision of the
form MS TT 8D “Declaration of Auditors of a Ship Manager
Admitted to the Tonnage Tax System. A circular will be is-
sued to the members once the consent of the Department
of Taxation is obtained.
Christos Tsissios
Chairman
PUBLIC SECTOR COMMITTEE
During the fourth quarter of 2014, the Public Sector Com-
mittee held 3 meetings and carried out the following activi-
ties:
1. During the first meeting, Costas Galinis and Maria Papa
were elected Vice Chairman and Secretary of the Commit-
tee, respectively.
2. The Committee formed its Action Plan for the period
2014-2016 which was then submitted to the Council for ap-
proval.
3. The Committee prepared a comprehensive list with sug-
gested seminars and training programmes to be implement-
ed during the next two years and forwarded it to the Educa-
tional Committee for consideration.
4. The Committee issued an updated version of the manual
which includes a summary of the key provisions for the main
legislation concerning Payroll and Pensions in the Public and
Wider Public Sector as well as Social Insurance, introduced
in the context of the Memorandum of Understanding with
Troika, and distributed it to all members of ICPAC.
5. The Committee met with the Chairman of the Parliamen-
tary Committee on Development Plans and Public Expendi-
ture Control. During the meeting a number of issues were
Institute News

discussed that are of the interest of the Institute’s members
who work in the public and the wider public sector as well as
ICPAC’s actions in assisting the Government to address the
effects of economic crisis.
6. The Committee studied the proposed legislation regard-
ing State Owned Enterprises and submitted its comments to
the Ministry of Finance.
7. The Committee started the discussion of several issues
regarding the public sector reform and had a first look at the
World Bank’s study “Cyprus at Crossroads: A Public Sector
for the Post-Crisis Economy”.
Spyros Spyrou
Chairman
VAT Committee
Under its new composition, the VAT sub-committee of the
Institute of Certified Public Accounts of Cyprus (ICPAC)
held its first meeting on September 17, 2014. Christos Pa-
pamarkides was appointed by ICPAC’s board as chairman
of the Committee and Harry Charalambous and Christos
Christodoulou were appointed unopposed by the committee
as the vice president and secretary respectively.
During the first session various outstanding matters initially
addressed in the previous Committee were discussed and
the objectives and priorities of the new Committee were set.
One of the issues the Committee considers of vital impor-
tance is to maintain and develop to the greatest possible de-
gree the mutual cooperation with the officers of the recently
unified Tax Department, including the Tax Commissioner,
Assistant Tax Commissioner and the heads of all districts
VAT offices. The collaboration of ICPAC with all stakeholders
will help all interested parties in the drafting, interpretation
and enforcement of the VAT Law. The involvement of other
stakeholders such as CCCI, OEB and other bodies repre-
senting various professions and trades, it is also imperative.
For this purpose the Committee has resolved, as a first step,
to request a meeting with the Tax Commissioner and its of-
ficers before the end of 2014.
The members of the Committee unanimously agreed that
as a result of the current economic crisis all sectors of the
economy are faced with, the competent government bod-
ies must now focus on policymaking that will help all enter-
prises, whether they are of domestic or foreign interests, to
be informed punctually and correctly in relation to proposed
changes to the legislation so that they can operate in a sta-
ble economic environment with the least possible adminis-
trative cost. The public consultation of proposed laws and
the interpretation of existing legislation are considered of
utmost importance in the effort of achieving mutual under-
standing and cooperation between the state and business
society. The rapid response to taxpayers’ requests whether
these concern VAT audits, applications for refund of credit
balances and clear replies to ruling requests will greatly help
establishing the trust and confidence of taxpayers towards
the tax authorities resulting in proper and timely fulfillment
of their tax obligations and consequently improve the budget
revenues.
Having in mind that one of the main problems faced by Cy-
priot businesses is the limited availability of cash whether
this results from reduced turnover or from bad debts or from
the inability of financial institutions to provide financing, the
Committee has considered certain proposals to be put for-
ward for discussion initially with the Tax Commissioner and if
necessary to be taken to a higher level.
The below recommendations aim at increasing the liquidity
of business and reducing their administrative costs:
(a) Extension of payment of import VAT and duties from one
month to a longer period e.g. three months
(b) Reduction of the waiting time for claiming bad debt relief
from 12 to 9 months
(c) Introduction of option to tax on leasing of immovable
property
(d) Increase to the cash accounting threshold from € 25.000
to €100.000
The Committee has scheduled a meeting with the Tax Com-
missioner in order to present the above proposals. A rep-
resentative from CCCI will be invited to participate in this
meeting.
Christos Papamarkides
Chairman
EDUCATIONAL COMMITTEE
During the fourth quarter of 2014, the Committee held three
monthly meetings to discuss the organization of training
seminars. As a result, the Committee has organized the
following seven seminars during the aforementioned period.
1. Recent amendments of Tax Legislation: Totally, 579 par-
ticipants have attended this seminar which has taken place
in Nicosia and Limassol on 15th of October and on 16th of
October respectively.
2. Immovable Property Tax and Capital Gains Tax: Overall,
272 participants have attended this seminar which has taken
place in Nicosia and Limassol on 27th of October and on 4th
of November respectively.
3. Application of Reverse Charge mechanism according to
VAT legislation: In total, 353 participants have attended this
seminar which has taken place in Nicosia and Limassol on
31th of October and on 6th of November respectively.
4. AML risk based approach and the role and duties of the
compliance officer: Totally, 375 participants have attended
this seminar which has taken place in Nicosia, Larnaca and
Limassol on 26th of November, on 28th of November and on
2nd of December respectively.
5. Audit monitoring visits and common deficiencies encoun-
tered: Overall, 559 participants have attended this seminar
which has taken place in Nicosia and Limassol on 5th of De-
cember and on 12th of December respectively. The seminar
was free of charge.
6. Foreign Account Tax Compliance Act (FATCA): In sum,
place only in Nicosia on 11th of December. The seminar
was free of charge.
7. High quality and efficient small company audits: Totally,
place in Nicosia and Limassol on 15th of December and on
16th of December respectively.
In brief, 2.798 participants have attended the 14 training
events in all cities during the fourth quarter of 2014.
In the meantime, the Committee is planning to organize, at
least, the following seminars during the first quarter of 2015:
1. Income and Corporate Tax basics for trainees and juniors
in Nicosia and Limassol on 15th of January and on 16th of
January respectively.
2. IAS 32, 37, 39, 40 as well as IFRS 15 in Nicosia and
Limassol on 27th of January and on 28th of January respec-
tively.
3. Capital Statements in Nicosia and Limassol during Feb-
ruary.
4. VIES, INTRASTAT, Mutual Assistance, and MOSS in
Nicosia, Limassol and Larnaca during March.
5. The basic principles of the General Health Care scheme
in Nicosia for the members of the Institute who are civil ser-
vants.
6. Tour Operators Margin Scheme (TOMS) in Nicosia and
Limassol.
Kostas G. Tsierkezos
Chairman
Advisory Services Committee
The Advisory Services Committee is a newly established
committee which instigates an enhanced role for ICPAC in
its endeavour to support its members that offer advisory ser-
vices.
The primary objective of our new committee is to assess and
monitor the developments relating to the provision of advi-
sory services such as, but not limited to:
• Mergers & Acquisitions;
• Restructurings;
• Feasibility Studies;
• Due Diligence exercises;
• Valuations; and
• Information technology
During our inaugural quarter of activity we have formulated
and submitted our action plan. This constitutes a two-year
plan covering a wide range of areas and issues that are fun-
damental to the provision of advisory services. Initially our
plan is to identify any gaps and, where relevant, propose
improvement. Our target areas of action include:
• Ethics and Independence issues pertaining to advisory
services
• Contracting and public procurement of advisory services
• Legal framework concerning the provision of advisory
services
• Technical issues
The members of our committee, who have wholeheartedly
responded to the call for this new initiative, and whom I per-
sonally thank, are already hands on to start producing results
and make an impact in the development of this specialized
line of services offered by our members.
Christophoros Anayiotos
Chairman
Advisory Services Committee
Quarter four of 2014 was the commencement of the second
term in office of this committee, welcoming new members
and revisiting our terms of appointment. On the first meeting
of 13th October 2014, the committee decided to request the
expansion of the terms of appointment to shift the primary
focus from regulation matters to strategy and commercial is-
sues in the light of significant changes in the industry.
Five subcommittees were created within the committee and
members were allocated in accordance with their preference
and skills.
The subcommittees and their primary objectives are as fol-
lows:
1. Strategy and Commercial Issues – Assist in the formu-
lation of a strategic plan for the industry and become part
of the voice of the Administrative Services Providers (ASP)
industry in Cyprus.
2. Law, Regulation and AML – Assist in the creation of a
level playing field within the three regulating bodies of the
ASP profession and monitor upcoming changes in the legal
and regulatory framework.
3. Communication and Education – Identify and communi-
cate with the training committee of ICPAC the educational
needs of the members practising in the ASP profession.
4. Taxation and VAT – Monitor changes in the taxation and
VAT legislations in Cyprus and abroad that may be affecting
the Cyprus ASP industry.
5. Government Agencies – Establish and maintain com-
munication lines with the relevant government departments
and other industry bodies to ensure that relevant matters are
communicated timely at the right level.
The committee worked closely with the General Manager of
ICPAC to promote its intention for a level playing field in the
regulatory framework across the three regulators of the ASP
profession.
An initial meeting was held on 4th December 2014 between
the committee and representatives of the Cyprus Fiduciary
Association (CFA) and it was agreed to create two working
groups for the:
• Formulation of a strategic plan for the industry,
• Identification of the regulatory differences between the
three regulating bodies.
Issues that were addressed by the committee in this quarter
include:
• The new CFC and de-offshorisation rules in Russia,
• The CFC rules in Poland and Ukraine,
• Proposed changes in the partnership legislation,
• Issues with the Registrar of Companies,
• Tax and VAT liabilities on directors acting as nominees,
and,
• Cyprus residence and citizenship matters
The proposed action plan of the committee will be presented
to the Board of Directors of ICPAC on 16th December 2014.
Andreas Athinodorou
Chairman
Institute News

STOCK EXCHANGE AND CAPITAL MARKETS
COMMITTEE
In September 2014, following an Institute’s Council deci-
sion, the Chairman and members of the Committee for
2014-2016 were appointed. During the last quarter of 2014
the Stock Exchange and Capital Markets Committee met
three times. The main activities of the Committee during
this period were as follows:
(i) The action plan for the years 2014-2016 has been pre-
pared and approved by the Committee’s members.
(ii) The Committee studied the ‘Practical Guide to Markets
in Financial Instruments Directive (MIFID II) and Markets in
Financial Instruments Regulation (MIFIR)’ which was issued
by CySEC. Following a discussion with CySEC officials, it
was decided to wait for the issuance of more detailed guid-
ance on the matter which would then be circulated to IP-
CAC’s members.
(iii) Appointment of a sub-committee for updating the docu-
ment ‘Continuous obligations of listed entities in the CSE
Regulated Markets’.
(iv) Appointment of a sub-committee for updating the docu-
ment ‘Continuous obligations of entities in the E.C.M. Mar-
ket in the CSE (Non-Regulated Markets)’.
(v) Appointment of a sub-committee for introducing the
document ‘Continuous obligations of Alternative Investment
Funds and Alternative Investment Fund Managers’.
Panayiotis Peleties
Chairman
INSOLVENCY COMMITTEE
The committee during the fourth quarter of 2014 met on nu-
merous occasions. The main priority of our committee was
to actively participate in the drafting of the Insolvency Laws.
Subcommittees were formed and all the proposed draft laws
were reviewed and our suggestions and recommendations
were put forward to the Ministry’s of Finance Project Team.
Meetings were held with the Cyprus Bar Association, The
Cyprus Banks’ Associations, with Registrar of Companies
officials and the Troika Team and the views and recommen-
dations of ICPAC were analysed and advocated for.
The committee is currently reviewing the final drafts of the
Examinership Law and the Insolvency Practitioners’ Law and
an advocacy strategy is being developed to ensure that the
laws will be functional and effective.
I would like to take this opportunity to thank all the commit-
tee members for their hard work, commitment and dedica-
tion who under very tight deadlines ensured that the views of
ICPAC were communicated to decision makers.
Michalis Avraam
Chairman
Shipping Committee
The shipping committee is one of the three new committees
set up by ICPAC this year. Its members represent both the
industry and the profession. Its terms of reference include
the cooperation with the government, other bodies and other
committees of ICPAC for the promotion of Cyprus as a ship-
ping centre.
During the first three months of its creation the commit-
tee finalised its terms of reference and prepared a two year
action plan. In November it had a meeting with the Cyprus
Shipping Chamber to align the efforts of the private sector
and a meeting with the Department of Merchant Shipping to
discuss the pending issues with form MSTT8D (declaration
for shipmanagers); the issues were resolved, a new wording
agreed and a circular to the members of ICPAC will be sent,
once the form has the approval of the tax department.
Cleo Papadopoulou
Chairwoman

CONSULTATIVE COMMITTEE FOR SMALL AND MEDIUM
FIRMS
During the last quarter of 2014 the new Consultative Com-
mittee for Small and Medium Firms met three times. Initially
the Committee decided on their action plan for the period
2014-2016, which was submitted to the Council for ap-
proval.
One of the first issues that the Committee is examining is the
possibility of an exemption threshold from statutory audit for
small companies. The Committee is evaluating an alternative
assurance work that can be used, instead of the full scope
audit.
The previous Committee members had compiled a survey
addressing a number of issues of the practicing members,
concentrating to Small and Medium firms. The survey was
circularised to all Small and Medium Practices, in November
2014. A Sub-Committee is now examining the outcome of
the survey which will be used to draw valuable conclusions
for possible further actions by the committee and of an infor-
mative tool for the Institute.
Two other Sub-Committees were formed during the above
period, the first one has undertaken to examine the introduc-
tion of an electronic library for practicing members on the
Institutes website and the second one, to assess the pos-
sibility of forming a professional provident fund or pension
fund for its members.
During the period under review the Committee received
some queries from members of the Institute which were
referred and discussed with the President and the General
Manager of ICPAC.
Andys Karlettides
Chairman
PUBLIC RELATIONS COMMITTEE
During the fourth quarter of 2014, the Public Relations Com-
mittee formally held three meetings and carried out the fol-
lowing activities as per the approved action plan:
Annual Sports Day Event
On 19 October 2014, the Committee organised the annual
Sports Day, which took place in October this year, rather
than in May which is commonly carried out. The event was
held at the premises of PASCAL Schools in Nicosia and it
was fully subsidised by ICPAC. The participants competed
individually or in teams in futsal, basketball, volleyball, ten-
nis and table tennis. Throughout the event a doctor and two
nurses were on duty. The children who also attended had
fun in the bouncy castle provided for the needs of the day
and all the participants enjoyed the food and drinks. The
New Members
During the period October - December 2014 the following persons have been accepted as new
Members of the Institute:
3874 Georgios Pavlopoulos ACCA
3875 Evdokia Papadopoulou ACCA
3876 Alexis Constantinou ACCA
3877 Ioanna Theodoulou ACCA
3878 Sophia Gregoriou ACCA
3879 Stelios Savva ACCA
3880 Andronikos Georgiou ACCA
3881 Olga Galicheva ACCA
3882 Panos Yiannos Christodoulou ACA
3883 Andreas Souames ACA
3884 Nicolas Andreou ACA
3885 Nicolaos Manousakis ACA
3886 Costas Symeonides ACA
3887 Andreas Medris ACA
3888 Penelope Vasiliadou ACA
3889 Loukis Afxenti ACA
3890 Maria Papetta ACA
3891 Maria Michael ACA
3892 Constantinos Solomonides ACA
3893 Georgios Ioannou ACA
3894 Soteris Georgiou ACA
3895 Androulla Andreou ACCA
3896 Christos Christofi ACCA
3897 Michalis Loizou ACCA
3898 Anastasia Vasileva ACCA
3899 Andreas Kyriakou ACCA
3900 Aglaia Siakouta ACCA
3901 Marios Soteriou ACCA
3902 Photis Triaros ACCA
3903 Nicholas Georgiades ACCA
3904 Gabriella Szakolyi Koumi ACCA
Removals
1946 Frantisek Dostalek KAC
Czech
2512 Zoe Petrou ACCA
Passed away
3239 Mari Siatarevian ACCA
families and friends of members enjoyed a fun day and had
a wonderful time.
Happy Hour Event at Moondogs Bar & Grill
On 13 November 2014, the Committee organised a Happy
Hour Event at Moondogs Bar & Grill in Nicosia. The event
was considered very successful, since a large number of
members and friends of ICPAC attended, which gave them a
chance to enjoy food and drinks at discounted prices espe-
cially for the members and friends of ICPAC.
Happy Hour Event at Lost + Found Drinkery
On the 11 December 2014, the Committee organised an-
other Happy Hour Event at Lost + Found Drinkery in Nico-
sia. A high participation of members and friends of ICPAC
marked the event, which featured cocktails at discounted
prices especially for the members and friends of ICPAC and
also food complimentary by ICPAC.
Both Happy Hour Events were considered very successful
and the Committee believes that Happy Hour events should
be organised on a monthly basis.
Christmas Charity Events
On the 15 and 22 of December 2014, a representation of
the Committee visited the Nicosia Youngsters Guesthouse
and the Nicosia Girls Guesthouse and donated gifts on be-
half of ICPAC. In particular, a PlayStation console, together
with two games were delivered to the Youngsters Guest-
house and a Wii console, together with Debenhams vouch-
ers were delivered to the Girls Guesthouse.
Future Events
The committee is currently working towards the planning of
numerous events, which will soon be announced by ICPAC.
These include, among others, Chinese night / dinner, Wine
Tasting event, Movies day at K-Cineplex, Karting, Paintball,
the Annual General Meeting and ICPAC’s dance.
On behalf of everyone in the PR Committee, we wish to all of
you happy holidays and a prosperous New Year!
Avgousta Papadopoulou
Chairwoman
DISCIPLINARY COMMITTEE DECISIONS
During the quarter, the Disciplinary Committee of the Insti-
tute imposed sanctions on the following case:
Case against Mr Demetris Papademetriou
The Institute’s Disciplinary Committee convened on 17 De-
cember 2014 to consider a complaint against Demetris Pa-
pademetriou, membership no. 420.
The allegations that Mr Papademetriou faced were:
1. Violation of Regulation 1.107, professional ethics, para-
graph 3(3)(d) regarding fundamental principles that require
each member not to use the capacity as member for the
furtherance of private interests of himself or of a person
close to him.
2. Violation of Regulation 1.107, professional ethics, para-
graph 3(3)(f) regarding fundamental principles that require
each member not to provide inaccurate or misleading data
and information to clients and third parties as well as to the
institutional and authorised organs of the Institute.
The Disciplinary Committee found Mr Papademetriou guilty
for both of the above offences and imposed the following
sanctions:
(a) €5.000 fine for the first offence
(b) €5.000 fine for the second offence
(c) €2.000 as expenses of the disciplinary process.
Institute News

12 ACCOUNTANCY CYPRUS • VOLUME 117 • DECEMBER 2014
GM’s corner: Think’n ahead!
Just peek around the corner,
it’s coming!!!
By Kyriakos
Iordanou
General Manager
of ICPAC
Recently we had two major developments
that affect Cyprus, one was with the con-
sent of the government and the other came
externally. I refer of course to the signing
of the FATCA agreement with the USA and
to the law passed in Russia regarding the
repatriation of Russian interest companies
and their profits, known as de-offshorisa-
tion.
Both of these acts aim at enhancing com-
pliance and transparency for national tax
residents in those countries, irrespective
of where they may trade, do business or
have financial assets and companies. It is
not coincidence that the two global financial
and business “awes” proceeded with such
measures, causing concerns to all other
countries. After all, they protect their own
national interests.
One should also have in mind the develop-
ments that are already visible in the inter-
national business horizon. G20, OECD and
EU are also coming with stricter compliance
and transparency measures. The Base Ero-
sion and Profit Shifting project for instance
and the Country-by-Country reporting are
measures that will touch upon us, increas-
ing the need advanced disclosures. The EU
is also coming with a similar act like FATCA
for the member states and the revised Eu-
ropean Directive for Anti-Money Launder-
ing will most probably provide for a public
register of the ultimate beneficial owners of
companies and funds. The voices calling for
“substance” are becoming louder. In addi-
tion tax planning practices are under scru-
tiny as it is argued that aggressive tax plan-
ning leads to tax avoidance, making it thus
a predicate offence.
So, the state of play is changing, no more
secrecy and anonymity. Compliance will be
mandatory for business, professionals, reg-
ulators and governments.
What is the take away for Cyprus?
Inescapably, Cyprus also falls in the loop of
the international developments as it is a des-
tination for international business. The bet
however is what we do in order to mitigate
for such a potential adverse effect, and how
we create comparative advantages versus
other jurisdictions. In my opinion, the pro-
fessionals should realise and comprehend
the upcoming changes. They need firstly to
proceed to proper keeping of their clients’
files and follow the KYC and Customer Due
Diligence procedures religiously. They need
to advise their clients of the need to demon-
strate substance and real presence on the
island. This, of course, requires open mind
and proper training.
On the other hand, the government needs
to take immediate actions and proceed to
legislative measures to tackle the issues
raised. To start with, the concepts of “tax
residence” and “beneficial owner” need to
be clearly defined and explained. In addition,
other government departments should en-
gage into an immediate expedition to identi-
fy all other factors that are involved with the
ease of doing business on the island and
significantly improve them, by streamlining
procedures and facilitating those who will
still continue or will select to use Cyprus as
their base for carrying out their international
business.
Although the new developments will most
probably drug along a number of difficul-
ties, possible increase in overheads and call
for more diligence and care, this is a one
way path. All of the stakeholders mentioned
above have to put together minds, resourc-
es and willingness to work for the common
cause. Should we fail to do so, then I am
afraid to say that our worries will be just a
few, as the international business inevitably
will also be!!!
So, let’s refrain from imitating the sympa-
thetic ostrich, and peek around the corner,
to see what is coming. There is no need
to wait for the postman to knock on our
doors!!!
YOUR BUSINESS
IS THIS PRECIOUS TO US
CHOOSE THE BEST INTERNATIONAL BUSINESS
SOLUTIONS PARTNER IN CYPRUS
abacus@abacus.com.cy, tel. +357 22555800, www.abacus.com.cy

Professional Briefing
FEE Members’ Assembly elects Petr Kriz
as President and Edelfried Schneider as
Deputy-President for 2015-2016
Brussels, 17 December 2014 – The 47 member organisa-
tions of FEE (Federation of European Accountants) ap-
pointed Petr Kriz as President and Edelfried Schneider as
Deputy-President for a two-year term.
“We must strive to regain trust in the accountancy profession
and emphasise the valuable contribution that accountants
and auditors make to the economy”, according to Petr Kriz.
“Current European developments and technological prog-
ress present a unique opportunity to achieve this objective.
Fostering relationships with our members and stakeholders
and listening to their needs will guide FEE in this process.”
Olivier Boutellis-Taft, FEE CEO commented: “I am very
grateful to outgoing President Kilesse for contributing to the
continued development of FEE. The new leadership brings
the perfect balance of professional and geographical back-
grounds to help steer FEE through the ongoing changes
affecting the profession.”
Petr Kriz (a member of the Chamber of Auditors of the
Czech Republic, KACR and the Association of Chartered
Certified Accountants, ACCA) served as Deputy President
of FEE in 2013-2014 and he has chaired the Banks Work-
ing Party since 2007. Petr has long-term experience in
leading audits and financial reporting advisory projects of
Czech and international banks and central banks. He is a
Partner with PricewaterhouseCoopers in Prague.
Edelfried Schneider (a member of the Institute of Public Au-
ditors in Germany, IDW) is the managing director of HLB
Germany GmbH. With extensive experience in providing
tax advice and audit services to SME clients, Edelfried will
greatly contribute to reinforcing FEE’s strategic coverage of
SME and SMP issues and further strengthen FEE’s work
on tax policy.
The FEE Members’ Assembly expressed its sincere appre-
ciation to outgoing President André Kilesse for his dedication
to FEE and the accountancy profession.
The Members’ Assembly also elected two new members to
the FEE Board: Alessandro Solidoro representing Italy and
Jorge Herreros on behalf of Spain.
About FEE
FEE (Federation of European Accountants) is an interna-
tional non-profit organisation based in Brussels that repre-
sents 47 institutes of professional accountants and audi-
tors from 36 European countries, including all of the 28 EU
member states.
FEE has a combined membership of more than 800,000
professional accountants, working in different capacities
in public practice, small and large accountancy firms, busi-
nesses of all sizes, government and education – all of whom
contribute to a more efficient, transparent and sustainable
European economy.
IFRS Foundation launches eIFRS
Professional
The IFRS Foundation today completed a major pro-
gramme of reforms to its suite of online IFRS resources
with the launch of a new flagship product, known as
eIFRS Professional.
eIFRS Professional has been developed from the ground up
to provide IFRS professionals with immediate online access
to authoritative, annotated versions of IFRS and supporting
materials.
Subscribers to the eIFRS Professional service benefit from:
• A new and unique Standards Comparison tool that allows
users to view changes to a Standard between current,
prior
and subsequent years.
• An entirely new user interface, with access to all IFRS
content
in less than three clicks.
• A powerful new search facility with sophisticated filtering
options.
• Access to the IFRS Foundation’s Education resources,
including annotated notes to the Standards, executive
briefing
materials and the IFRS Pocket Guide.
• Full access to the IFRS Foundation’s vast archive of IFRS
content, available in multiple languages and spanning
nearly
four decades.
To find out more about eIFRS, or to watch a video walk-
through of the new functionality of eIFRS Professional,
please visit the eIFRS homepage.
In addition to the launch of eIFRS Professional, the IFRS
Foundation is also making available new versions of the other
components of its eIFRS suite of online resources. eIFRS
Basic provides users with limited access to the basic IFRS
Standards, while eIFRS Comprehensive includes a subscrip-
tion to eIFRS Professional as well as offline, print editions
of the Standards and other materials. Existing subscribers to
eIFRS will automatically be upgraded to eIFRS Professional.
IASB launches Investors in Financial Re-
porting programme with support from
leading members of the global invest-
ment community
The International Accounting Standards Board (IASB)
today announced the launch of its Investors in Finan-
cial Reporting programme. Created with the support of
some of the world’s leading asset managers and own-
ers, the programme is designed to foster greater inves-
tor participation in the development of International Fi-
nancial Reporting Standards (IFRS).
IFRS is required for use by more than 100 countries. The
IASB, as the public interest body responsible for IFRS,
consults extensively with investors and other stakeholders
around the world to ensure that its Standards provide high
quality financial information. The Investors in Financial Re-
porting programme has been developed to further extend
investor participation by specifically encouraging greater in-
volvement from the buy-side community.
Investor Advocate to Lead the IAASB’s
Consultative Advisory Group
Matthew Waldron has been appointed as the incoming
Chair of the Consultative Advisory Group (CAG) to the Inter-
national Auditing and Assurance Standards Board(IAASB),
effective April 1, 2015.
His appointment, which has been approved by the Public
Interest Oversight Board,* follows his election by members
of the IAASB CAG.**
As Chair, Mr. Waldron will lead the IAASB CAG—an inde-
pendent body comprising regulators, preparers, internation-
al investor and user groups, and other stakeholders with an
interest in international auditing and assurance—in provid-
ing strategic and technical advice in the public interest to
the IAASB. Mr. Waldron will play a key role in ensuring that
the CAG’s views are heard and considered in the IAASB’s
deliberations.
IFAC ANNOUNCES ELECTION OF NEW PRESIDENT,
OLIVIA KIRTLEY OF THE UNITED STATES
Rachel Grimes of Australia Elected Deputy President;
Board Members Elected and New Members Admitted
(Rome, Italy, November 7, 2014) – The International Federa-
tion of Accountants® (IFAC®), the global organization for
the accountancy profession, today announced the election
of its President, Olivia Kirtley of the United States, for a two-
year term ending in November 2016. Ms. Kirtley is the first
female President of IFAC, as well as the first from business
and industry rather than public accounting. The IFAC Council
also announced the election of Rachel Grimes of Australia as
Deputy President, a position previously held by Ms. Kirtley.
“This is an exciting time for IFAC with challenges and op-
portunities for the profession at every level,” Ms. Kirtley said.
“As President, I look forward to engaging with member bod-
ies and our many stakeholders as we seek ways to advance
the impact and value of our profession, and in serving the
public interest.”
Ms. Kirtley, a Certified Public Accountant and Chartered
Global Management Accountant, is a non-executive direc-
tor of US Bancorp, Papa John’s International, and ResCare,
Inc. She began her career with an international accounting
firm, followed by 20 years of executive management posi-
tions with a publicly traded global manufacturer and sub-
sequent joint venture of Emerson Electric Co. and Robert
Bosch GmbH. She is a former Chair of the American Insti-
tute of Certified Public Accountants (AICPA) and the AICPA
Board of Examiners. Ms. Kirtley is a recognized advocate for
strong corporate governance and was named by the Nation-
al Association of Corporate Directors (NACD) Directorship
100 as one of the top corporate directors and governance
professionals in the US. First elected to the IFAC Board in
2007, Ms. Kirtley became Deputy President in November
2012. She has chaired the Planning and Finance Commit-
tee, Constitution Review Working Group, and a task force for
enhancing service to professional accountants in business,
in addition to being a member of the Nominating Committee,
Regulatory Liaison Group, and the independent Task Force
on Rebuilding Public Confidence in Financial Reporting.
Ms. Grimes is CFO Technology at Westpac, a multinational
financial services firm; she previously served as Director of
Mergers and Acquisitions. She has more than 24 years of
experience across the financial services sector, at Westpac/
BT Financial Group as well as at PwC. A member of Char-
tered Accountants ANZ and CPA Australia, Ms. Grimes has
served the Australian accounting profession over a signifi-
cant period. She was elected to the Board of the Institute of
Chartered Accountants Australia in 2006 and was appointed
President in 2011. Ms. Grimes became a member of the
IFAC Board in November 2011. As Deputy President, she
will chair the Planning and Finance Committee; previously
she was a member of this committee, as well as the former
Governance and Audit Committee.
Commenting on the leadership transition, outgoing IFAC
President Warren Allen said, “As I hand over the presidency
to Olivia, I know that I will be leaving IFAC in the most ca-
pable of hands. She has been a great source of support for
me during my term, and was a leader on key initiatives that
have enhanced and will sustain the accountancy profession
and help to transform IFAC into a more responsive and sus-
tainable organization.”
“Rachel’s experience in the financial services industry, focus-
ing on acquisitions, accounting processes, and technology,
and the need for global policies that enhance transparency,
together with her experience as a volunteer leader of a major
member body, will be an asset in the Deputy President’s
role,” Mr. Allen added.
New Board Members Elected
The IFAC Council also elected five new members to the
IFAC Board: Raphael Ding (Hong Kong), Richard Petty (Aus-
tralia), Kumar Raghu (India), Shinji Someha (Japan), and Joy
Thomas (Canada). The IFAC Council also re-elected Ahmadi
Hadibroto (Indonesia) and Masum Turker (Turkey). These
members add to the diversity of the IFAC Board—in gender,
geography, and professional experience.
IFAC Admits New Members
The IFAC Council admitted three new associates: the Cham-
ber of Authorized Auditors of Republic of Serbia, the Indo-
nesian Institute of Public Accountants, and the Non Profit
Audit Association “Sodruzhestvo” of Russia. Two existing
associates were admitted as members: the Association of
National Accountants of Nigeria and the Institute of Certified
Management Accountants of Sri Lanka. Additionally, IFAC
admitted the Dutch Institute of Management Accountants as
a member.
For a full listing of IFAC members, see the membership sec-
tion of IFAC’s website.

Interview
With regard to our question as to whether the
recent fall in the Eurozone core inflation may
justify a decision by the ECB to introduce quan-
titative easing, by buying government bonds, Mr
Clerides stated that the famous quantitative eas-
ing must be tried but he is not sure if it is going to
work. What we need is governments in healthy
economies to instigate a “fiscal” stimulus and
not expect all the adjustment burden to be borne
by problematic countries. He added, however,
that quantitative easing is not adequate and that
structural reforms are also needed to ensure
long term growth. Fiscal easing can only pro-
vide an immediate boost, but long term recovery
needs also structural reforms.
To our question as to how they propose to deal
with the non-performing loans in terms of their
restructuring and resolution, he answered with
a “human face” on those that fell on bad times
and with harshness on those that abused the
system. We will try to make borrowers viable by
extending the duration of the loans and reduc-
ing their instalments, giving them grace period in
instalments to overcome temporary cash prob-
lems, etc.
The interview with Mr. Clerides follows:
Mr. Clerides, we would like to start
our interview by asking for your views
with regard to the significance of
stress-testing of 130 systemic banks
of the Eurozone.
It is very significant, as it is the first step towards
Eurozone central supervision of its systemati-
cally important banks. This is, in turn, another
step towards European integration.
What are your comments with regard
to the results of the stress tests for
the Cyprus systemic banks?
The results of the Cypriot Banks were quite
good, especially if we take into account that the
stress tests came soon after a major negative
shock to the banking system, with the collapse
of Laiki, the haircut of Bank of Cyprus deposi-
tors and Cyprus in a serious recession.
To what extent the generally good re-
sults of the stress testing of the Cy-
prus systemic Banks, including the
Cooperative Central Bank, lead both
to the expansion of credit to the pri-
vate sector and the decrease of inter-
est rates, thus stimulating economic
recovery?
The expansion of credit to the private sector by
the banks depends on three factors: their capi-
tal position, their liquidity and the availability of
good “bankable” projects to finance. The stress
tests have given comfort to banks about their
capital situation and can act as a catalyst for
consumer confidence to trust the banks again
with their money – thus improving bank liquidity.
It doesn’t however solve the issue of non-avail-
ability of good, “bankable” projects to lend to.
What about the stress tests results
for the large banks of the other Euro-
zone states?
They were in line with expectations, revealing
some weaknesses in banks of Southern Eu-
rope, where the economies have more prob-
lems than in countries in Northern Europe.
However the Eurozone banks have
been stress tested before without
any convincing results. What are
your comments?
Stress tests are one of many tools to check the
health of banks. They should be viewed always
in this context; and not be allowed to supersede
human judgment.
Do you believe that the banking
Union should have been introduced
in parallel with the monetary Union?
Yes, but also the Maastricht criteria should have
been enforced more rigorously and not political-
ly, and they should have been more wide rang-
ing to include competitiveness indicators and
institutional analysis. For example, are the in-
stitutions of the country – Government / Parlia-
ment capable of sticking to the fiscal discipline
that needed to be followed?
What are your comments about the
foreclosure laws and procedure?
A necessary modernization of our legal system.
I am not sure that the process we set for dis-
posal is the best.
Do you think that Cyprus may benefit
by adopting the policies followed by
Ireland for exiting the crisis?
If we can afford the Irish Nama (the name of the
Irish bad bank which took over the problematic
assets of Irish banks) we should proceed with
it, adapting it to Cyprus situation to cover also
Retail NPL’s.
To what extent you believe that the
recent fall in the Eurozone core infla-
tion may justify a decision by ECB to
act boldly by buying long term gov-
ernment bonds besides buying pri-
vate sector covered bonds?
The famous quantitative easing must be tried
but I am not sure it is going to work. What we
need is governments in healthy economies to
instigate a “fiscal” stimulus and not expect all
the adjustment burden to be borne by problem-
atic countries.
On the other hand there is a view that
even if the ECB engages in quantita-
tive easing, i.e. buying Government
bonds, it will not help significantly
the recovery unless governments
proceed with economic structural
reform measures. Can we have your
views on this issue?
My answer to the previous question is relevant.
Structural reforms are also needed to ensure
long term growth. The fiscal easing I mentioned
can only provide an immediate boost, but long
term recovery needs also the structural reforms.
To what extent do you believe that an
Asset Quality Review was necessary
before undertaking the stress test
(comprehensive assessment) of the
130 systemic banks of the Eurozone?
The AQR was basically designed to test whether
In an interview we had with Mr. Marios Clre-
rides, General Manager of the Cooperative
Central Bank we have been informed, inter
alia, that the results of the stress tests of the
Cypriot Banks were satisfactory, especially
if we take into account that the stress tests
came soon after a major negative shock to
the banking system, with the collapse of
Laiki, the haircut of Bank of Cyprus deposi-
tors and Cyprus in a serious recession. In
response to our question whether the banks
can now expand credit to the private sector
to stimulate economic recovery Mr Clerides
replied that the stress tests have given com-
fort to banks regarding their capital situa-
tion and can act as a catalyst for consumer
confidence to trust the banks again with
their money – thus improving bank liquidity.
It doesn’t however solve the issue of non-
availability of good, “bankable” projects to
lend to.
Interview of MARIOS CLERIDES,
GENERAL MANAGER
of the Cooperative
Central Bank
To Hadjirousos, Editor
and Tassos Anastasiades, Deputy Editor,
Accountancy Cyprus, Journal
The results of the Cypriot Banks were quite good, es-
pecially if we take into account that the stress tests
came soon after a major negative shock to the banking
system...
Helping the needy, supporting local communities, being
“fair” to clients has always been in the Coop DNA and
will continue.

Interview
there was under provision for bad loans in some
banks. If we read it literally doing it, should be an
“insult” to the accountants and national country
supervisors of these banks. If we read it realisti-
cally, bad loans provisioning has always an ele-
ment of subjectivity and hence applying a com-
mon benchmark does ensure fairness.
What is the common equity ratio of
the Cooperative Central Bank? Are
you confident about this ratio for the
Co-operative Central Bank?
The Core Tier-1 ratio of the Cooperative Central
Bank was 13,4% (September 2014). Under the
baseline scenarios of the recent stress tests, the
ratio increases to 14,07% at the end of the 2016,
while under the extreme scenario it ends up at
9,32%, above the 8% minimum required. So we
are quite confident about our capital needs.
How do you propose to deal with the
non-performing loans in terms of their
restructuring and resolution?
With a “human face” on those that fell on bad
times and with harshness on those that abused
the system. We will try to make borrowers viable
by extending the duration of the loans and reduc-
ing their instalments, giving them grace period in
instalments to overcome temporary cash prob-
lems, etc.

Could you brief us about the corpo-
rate social responsibility policy of the
Cooperative Central Bank?
Helping the needy, supporting local communi-
ties, being “fair” to clients has always been in the
Coop DNA and will continue.
Finally can we have your personal
assessment as to when Cyprus will
exit recession and achieve a positive
growth rate?
2015 seems to be the year when we will exit re-
cession. The key question is not this, but how
strong will the recovery be and, related to it,
which sectors will lead it. My prediction is for a
very weak recovery.
A necessary modernization of our legal system. I am
not sure that the process we set for disposal is the
best.

Economy
By Phidias
Pilides
President
Cyprus Chamber
of Commerce
& Industry
Views of the Cyprus Chamber of Commerce and
Industry on the economy as expressed during the
Annual general meeting of 2014
Unfortunately, the economic outlook of the EU
and the Eurozone also remain unpredictable
meaning that the prospects for the Cyprus econ-
omy in 2015 are uncertain.
However, the CCCI’s believes that there is hope
about the future of the economy. The business
community believes that now, after withstanding
the shock of the Eurogroup decisions and the
banking collapse and despite the unprecedented
decline in production and the creation of mas-
sive unemployment, we can remain optimistic
and plan for growth. Some hopeful signs have
emerged from the revision of GDP on the basis
of the new national accounts methodology ad-
opted by Eurostat. This has meant that GDP has
been upwardly revised and as a consequence
public debt as a ratio to GDP is now at a more
manageable 105%. At the same time the rate
of decline of GDP has been further reduced in
2014 and a positive rate of growth of GDP is
expected for 2015.
The improved performance of the economy has
been the result of the strict implementation of
the provisions of the Troika memorandum and
particularly of the policies of containment of
public sector expenditures. As a result there has
been an upgrading of the Cyprus economy by
the international rating agencies. Developments
in the banking sector also give grounds for fur-
ther hope as large amounts of foreign capital
have been attracted by the banks, enabling them
to successfully pass the EU wide stress tests. At
the same time a further vote of confidence in the
Cypriot banking sector comes from the fact that
the four systemic banks of Cyprus will be directly
supervised by the European Central Bank.
However, the business community would like
to emphasize that the good messages from the
public and banking sectors are not yet reflected
in the real economy. The rate of unemployment
continues to be high especially among those
aged 20 to 24. Hence, the Cyprus Chamber
would like to send the government and the rest
of the political establishment the urgent mes-
sage for the need to adopt the measures that
would enable the economy to resume growth.
For this the Chamber has the following priority
proposals:
First, there is an urgent need to find a solu-
tion for the restructuring of the banking sector.
More specifically we would like to see the pass-
ing of the essential legislation which will allow
the banks to deal with non-performing loans.
The business community would also like to see
the fall of lending rates, the reduction of the tax
on interest earnings, the simplification of bank
lending documents, the channeling of the funds
made available by EBRD to SMEs, the reduc-
tion of banking operating costs, including salary
levels, and the readjustment of banking working
hours.
Second, there should be further liberalization
of the business environment with a view to at-
tracting foreign direct investments in the face
of continuing liquidity shortages and the inability
of the public sector to implement infrastructural
projects. It is also essential for the government
to proceed with PPI initiatives with international
strategic partners. Hence the Chamber would
like to urge the government to organise more
visits by the President of the Republic, with the
active participation of the business community to
important foreign destinations to ensure that for-
eign investors receive the message from Cyprus.
We further believe that the government should
immediately proceed with the establishment of
the casino and the facilitation of the implementa-
tion of private sector projects such as marinas,
golf courses and the promotion of shipping and
health tourism.
Thirdly we would like further action in the public
sector despite the progress in the implementa-
tion of expenditure reduction. The private sector
would like to see further measures being imple-
mented to reduce bureaucracy and ensuring that
public services fulfil their mission in providing ef-
ficient and low cost services. If procedures are
not simplified the attractiveness of Cyprus as a
foreign investment destination would remain lim-
ited. Hence CCCI suggests that a new approach
be adopted so that foreign investors have to deal
with only one special task force ensuring the
effective coordination takes place of all govern-
ment agencies involved in granting the required
licences. It is also proposed that more depart-
ments adopt e-government as a way of provid-
ing services to the public together with a new
evaluation system of civil servants and the wider
implementation of staff interchangeability.
Fourth priority would be privatization. This rep-
resents a major policy initiative and the govern-
ment should proceed with the privatization of
Telecommunications, Ports, Cyprus Airways and
Electricity. For this the government should adopt
internationally accepted norms and procedures
to ensure openness and transparency. Privati-
zation will bring additional funding and could be
beneficial by reducing costs and improving ef-
ficiency.
Fifth proposal concerns the adoption of a new
approach in order to ensure the full exploitation
of all the natural advantages of Cyprus, such as
the strategic location, high quality human re-
sources, full EU and Eurozone membership and
good infrastructure. To this list we now envis-
age to add the natural gas resources and their
potential for the future. We fully support the
government in its approach in building the stra-
tegic alliances with neighbouring countries. We
believe that the energy resources can become
a basic ingredient for the future development of
the Cyprus economy. But we must warn that for
energy to become the blessing we believe the
government should proceed to finalise the study
for establishing a fund on the lines of the Norwe-
gian example which would ensure the prudent
management of natural resources.
Sixth priority would be the radical reform of local
government, which is inefficient and costly aim-
ing to reduce the number of municipalities and
the consolidation of their services.
Finally, this plan of action should include the fol-
lowing: the strengthening of the competitiveness
of tourism, through a new sectoral plan of action,
more effort to secure EU structural funds for the
manufacturing sector, further government effort
to gradually change the attitudes of organised
labour and political groups, provide a new ap-
proach for the solution to the issue of insolvency
, strong action by the government in the pursuit
of the thorough administration of justice in a
strong and fair manner to inspire confidence.
We would also recommend to the government a
rethinking on the national health scheme with a
view to renegotiate with troika in order to post-
pone its implementation until more appropriate
times.
The final message of the business community is
clear. We look to the future. We have spelt out
our policy priorities which if implemented will en-
sure that the future of the country will be bright
and could resume growth sooner than later.
Regarding the developing economic situation in 2014 and the prospects for 2015 the Cyprus Cham-
ber of Commerce and Industry would like to express its concern at the continuing adverse international
economic outlook. At the same time there is worrying political upheaval in the Middle East region, such
as the provocations by the Turkish government through the sending of the Turkish research ship in the
exclusive economic zone of Cyprus, together with the extremely violent actions of the Islamic jihadists.
The final message of the business community is
clear. We look to the future.

Economy
By Michael Pilikos
Director General of
the Cyprus Employers
& Industrialists
Federation (OEB)
The Return of Cyprus in the
International Capital Markets
A Historic Day
What led to this triumphant return is a combi-
nation of facts: the strict implementation of the
Memorandum, the relatively good performance
of the economy, the positive credits by Troika
and the good assessment reports of the global
rating corporations.
The years’ long effort was an absolute success
and was made possible through the painstaking
efforts and sacrifices made by the people and
the business community. Combined with the
successful return of Cyprus in the capital mar-
kets, it is expected to bring significant benefits
for the economy.
The return of Cyprus in the capital markets fol-
lowing Ireland, Portugal and Greece, marks an-
other step towards the stabilization of the econo-
my and the banking system and especially in the
recovery of the lost confidence.
The € 750 million raised by issuing the five-year
bond, will be allocated to domestic debt that ma-
tures shortly, which costs more if we consider
that the borrowing interest rate is 4.75% as
compared to 5.15% which is that of the current
debt. Therefore, there is a significant benefit for
the public finances which results not only in a
reduction of the interest payments but also in
the existing debt which approaches € 19 billion.
Of course, on one hand we see the debt to be
reduced by domestic borrowing, but simultane-
ously to be increased by foreign borrowing. At
the end, we must not forget that the debt will be
repaid by local taxpayers and companies.
The successful adoption of the five-year bond,
besides helping restore liquidity and the capital
adequacy of the economy, confers a direct ben-
efit to the banking sector in helping them boost
their liquidity. The money raised will be used for
the repayment of the government bond issued
by the Bank of Cyprus in the context of restruc-
turing. Furthermore, it is also an indicator in the
right direction for all the banks in giving them the
chance to examine the possibility to strengthen
their capital base, as it is done by the Bank of
Cyprus. It is certain that the return of Cyprus in
the international markets strengthens the pros-
pect of foreign investors to participate as share-
holders in the Cyprus banks.
I believe that the recovery of the international
market confidence would act positively to revive
domestic market and especially business ac-
tivities. It is with no doubt another step towards
the consistent presence of Cyprus in the capital
markets and its consistent capability to finance
its needs Therefore, I believe that this positive
impact will be reflected in further assessments
of the economy by the credit rating corporations.
The economic situation of our country is now
considered to be more promising and this would
act as a catalyst in encouraging both local and
foreign investors to look for investment opportu-
nities. If we also add to this positive development
the discovery of natural gas, then future pros-
pects of our economy are even greater.
Of course, this fact should in no way be con-
sidered as a termination of the difficult consoli-
dation and reform programme. On the contrary,
we must extend our efforts required for reforms,
structural changes and fiscal consolidation as
our target is a healthy economy with good pros-
pects and growth. 
Three years after its exclusion from the international capital markets in May 2011, Cyprus
has managed to return to the international capital markets by formally issuing a five-year
bond. The interest for investment far exceeded actual expectations as it reached a stag-
gering € 2 billion, four times compared to € 500 million which was the initial estimate.
The recovery of the international market confidence
would act positively to revive domestic market and
especially business activities.

Economy
By Theodore
Panayotou
Cyprus International
Institute of
Management *
Norway-type Fund for Natural Gas
with Escrow Account for Turkish Cypriots
Despite the Government’s determination not to
give in, Turkey’s threats and actions within Cy-
prus Exclusive Economic Zone concerning the
exploitation of natural gas can potentially result
in an experience similar to that of S-300, when
we were forced to pay the cost of a defence sys-
tem without ever enjoying its benefits. As the
ancient Greeks used to say, “Necessity forces
even the hand of gods”. But this is not inevi-
table if the Government and the Parliament act
instantly to create a special fund for deposit-
ing the proceeds from the exploitation of natu-
ral gas, with the share of Turkish Cypriots (20
-30%) going into a special escrow account in
the fund to be released to the Turkish Cypriots,
with interest, only upon the solution of the Cy-
prus problem.
The simple statement that the Turkish Cypriots
will begin to benefit when the Cyprus problem is
solved is not enough and creates the suspicion
that we stall the solution of the Cyprus problem
to usurp their share. This is a totally unfound-
ed claim on the part of the Turkey which finds
a fertile ground among some foreign policy-
makers and in a part of the international pub-
lic opinion. The creation of a fund to guarantee
the share of Turkish Cypriots would create an
ever-increasing financial incentive for Turkish
Cypriots to seek understanding and a solution
to the Cyprus problem sooner rather than later. I
made this proposal three years ago and several
times thereafter as a voluntary action on our part
to pre-empt Turkey’s claims on resources that
belong to all the Cypriots and only the Cypriots
regardless of ethnicity.
Such an action would help to defuse the crisis
with Turkey without any retreat on our part. If
not, we will be pre-empting Turkey’s arguments
and pretexts and prove that its real motives are
not the economic interests of Turkish Cypriots,
* Dr. Theodore Panayotou, 2007 NOBEL Peace Prize Contributor, is Professor of Economics and Ethics and Director of the Cyprus International
Institute of Management (CIIM), Visiting Professor at Tel Aviv University and Member of the Cyprus President’s Council of the National Economy. He
taught Economics for 25 years at Harvard University, served as Senior Economist at the Rockefeller Foundation and advised Presidents and Premiers
in 15 countries including China, Mexico, Russia and the USA. He has published over 100 books, monographs and peer-review articles on economics
and business and served as consultant to companies, governments, the UN and the World Bank. Contact: theo@ciim.ac.cy
but its own geopolitical expansionism. It will also
demonstrate in a practical way to our partners
in the European Union and the UN, our good
intentions towards our Turkish Cypriot compatri-
ots and our sincere desire for a just solution and
peaceful coexistence. Best of all, it would be a
resounding testament that we consider Cyprus
as an indivisible entity whose wealth belongs to
all Cypriots, irrespective of whether the wealth is
found in the south or north. Any other approach
would cast shadows of partition.
The benefits of such an action would not only
be political. It would also be economic. By es-
tablishing such a fund we will be escaping the
“resource curse”, the paradox that countries with
abundant non-renewable natural resources such
as oil and natural gas tend to have lower levels
of social development and economic growth than
countries with fewer natural resources. This is
due to several reasons such as the reduction
of the competitiveness of other sectors of the
economy, volatility in government revenue due
to price volatility of fossil fuels, mismanagement,
inefficiency, and corruption caused by the easy
wealth.
There is abundant evidence that the income from
the exploitation of natural resources reduces the
pressure and the incentive to develop a knowl-
edge-based economy and promote entrepre-
neurship and innovation while it retards the ra-
tionalization of public finances and the practicing
of sound macroeconomic management. This has
been the experience of Venezuela and several
Arab and other countries, rich in mineral wealth,
which literally have wiped out their development
prospects with the inevitable distortions and the
complacency that the easy wealth has created.
The money collected this fund should not be
spent on the running costs of the state but be
invested in long-term investments such as re-
search and innovation, renewable energy and the
infrastructure needed to increase the productiv-
ity and competitiveness of the economy, just as
Norway, Australia, New Zealand, Kuwait, Alberta
in Canada and Alaska in the U.S. have done.
These forward-looking countries and states have
been saving all or part of their revenues from
oil and other natural resources in special long-
term investment funds such as the Fund of Fu-
ture Generations of Kuwait, the Pension Fund of
Norway, and the Heritage Fund of Alberta. And
why not Cyprus Heritage Fund or even better the
Cyprus Fund of Future Generations? Only the in-
come from these investments is being used for
recurrent expenditures.
This is Israel’s approach to the discovery and ex-
ploitation of hydrocarbons in its EEZ. But, unlike
Israel with its prudent fiscal policies, and strong
technological base for efficient use of natural gas
revenues, Cyprus faces a serious risk of waste
distortion of economic priorities. In Cyprus, in
particular, revenues from natural gas risk be-
ing wasted to maintain an inflated and wasteful
public sector and to increase social benefits and
subsidies to organized interest groups, pressures
that our political system finds very difficult if not
impossible to resist.
Our national interest requires of us to urgently
establish by law the Cyprus Future Generations
Fund with clear provisions to secure the interests
of all Cypriots, whether they live in the free or
the occupied areas, whether they live in the pres-
ent or in the future. We should not wait for a hot
episode to take initiatives in the right direction
to defuse the crisis, because then they may not
count the same as when they are done volun-
tarily as a practical expression of goodwill. Like-
wise, we should not wait for the revenue from
natural gas to begin flowing into the state coffers
to take measures to protect our economy and
the interests of our children from the “resource
curse”. Then we would not need research com-
mittees to investigate and to convey responsibili-
ties. The government and the House will bear full
responsibility.
The simple statement that the Turkish Cypriots
will begin to benefit when the Cyprus problem is
solved is not enough and creates the suspicion
that we stall the solution of the Cyprus problem to
usurp their share.

Economy
By Michalis
Sarris
Former Minister
of Finance
The Way Forward:
Work with the Troika - Aspire for Growth
Mostly due to the pragmatism and resilience of
Cypriots, some twenty months after the severe
blow of the bail-in of bank depositors, economic
activity is showing increasing signs of stabil-
ity. Although the shock has caused significant
damage, the impact has not been as devastat-
ing as many had feared. The international busi-
ness sector may not be growing, but it has not
collapsed either, tourism performance has been
impressive and Cyprus still enjoys a relatively
high standard of living. Consumer and business
confidence is slowly beginning to return.
The severity of the crisis, however, has left a
legacy that will continue to burden the economy
for many years to come. With growth prospects
modest at best, unemployment remains high
and significant job creation will likely not begin
any time soon. While the repair of the banking
system has made considerable progress, it is
being held back by non-performing loans, which
are also keeping lending rates from converging
towards the lower EU averages. High house-
hold and enterprise debt burden will tend to
discourage consumption and limit the effective
demand for investment financing. Meanwhile,
the need to continue reducing the budget deficit
will call for politically demanding choices among
competing public expenditure priorities, such as
those on the public sector wage bill, health and
growth-supporting investments. These choices
must be such as to support structural reform
of public expenditure so as to put the public
finances on a sustainable path, while favoring
growth-enhancing public spending.
The growth prospects of the Cypriot economy
will continue to be affected by external econom-
ic conditions, particularly in the Eurozone, which
currently remain uncertain. In the short-term,
the political crisis and economic slow-down in
Russia will impact negatively the economy. But
the key to the return to sustainable positive eco-
nomic growth is to implement without hesita-
tion or delay the structural reform program, at
a minimum as agreed with the Troika, and, if
we can master the necessary political courage,
go further. This means completing urgently
the privatization agenda, reducing the bureau-
cratic impediments to private sector initiatives
while combating corruption, improving the ef-
ficiency of the public sector, liberalizing markets
and professions, pursuing active labor market
policies such as flex-time, apprenticeships and
on the job training, restructuring education to
improve the quality of outcomes and achieve a
better fit with labor market requirements, and
reforming labor unions and political parties.
These reforms should encourage private sec-
tor investment, including foreign direct invest-
ment, an essential element of the new growth
paradigm.
While the key elements of the reform agenda
and their importance for creating the conditions
for the resumption of growth are clear, there
is also a paradoxical consensus across the full
range of the political party landscape and most
mass communication media that the Troika
is responsible for the problems of the Cyprus
economy and that we should, therefore, get
rid of it as soon as possible. In reality, Cyprus
surrendered its economic sovereignty, through
the March 2013 bail-in/bail-out, because of
a homegrown deadly combination of banking
and fiscal irresponsibility, which had already led
to serious domestic and external imbalances.
In five short years between 2007 and 2012,
through unprecedented fiscal laxity, the best fis-
cal performer in the Eurozone was transformed
into one of the worst, and Cypriot government
debt rose sharply from 48% to 75% of GDP.
In parallel, poor bank corporate governance,
largely unchecked by the Central Bank because
of the widespread and ECB – supported phi-
losophy of “light-touch” bank supervision, led
to a huge bank credit expansion, high-risk in-
vestments and a large external current account
deficit. To complete this negative picture, ris-
ing money wages, without productivity or qual-
ity improvements, led to a significant erosion of
external competitiveness.
An adjustment program to address these chal-
lenges was urgently needed and was put in
place together with the Troika after long and
harmful delays. The first objective of the Troika
program, which was to eliminate the large gov-
ernment budget and external account deficits
– indicative of a country living beyond its means
–, has been largely achieved ahead of the ex-
pected timeline. Significant spending cuts in
most expenditure categories and tax revenue
increases are pointing the public finances to-
wards a primary surplus while, mostly through
a decline in imports together with a modest in-
crease in exports, the external balance is sub-
stantially improved. Competitiveness has also
improved through a reduction in unit labor costs
in the private sector, but the reduction in money
wages in this sector has probably reached its
limits and any further improvements in com-
petitiveness will have to come from productivity
gains. This correction of past sins has contrib-
uted to the increase in unemployment and to
hardship in many households and enterprises,
but Cyprus’ overall standard of living even in
2013, the worst year of the crisis, as measured
by GDP continues to be about twice as high as
it was in the year 2000. In the narrative against
the Troika it is often forgotten that Troika fi-
nancing has allowed Cyprus to continue to have
a budget deficit and pay its bills through 2016.
Without this facility the adjustment would have
been much more abrupt and painful and the
economy would have contracted much more
sharply.
None of these early successes in correcting
the imbalances, which brought about the cri-
sis in the first place, will have been worthwhile,
unless the necessary structural reforms are
implemented so that the country can aspire to
sustainable recovery and, eventually, economic
growth. But for this to happen the reform pro-
gram has to be “owned” by the political estab-
lishment and society at large. For now, this is
not the case. This can be partly explained by
the fact that much of the political leadership’s
energy is spent on the “blame game” as to who
is responsible for the crisis instead of explain-
ing why the proposed measures are for the
benefit of the vast majority of the Cypriot so-
ciety. Also in refusing to take responsibility for
policy mistakes and past excesses, it is easier
and more convenient to absolve the local vot-
ing population and to blame the “foreigners”
who are “imposing” conditions and as such they
are an easy target. The people of the Troika
themselves could have done a better job in ex-
plaining the rationale of the proposed reform
program, through a more active engagement
with civil society.
But if the reform program agreed with the
Troika is for the benefit of the majority of the
Cypriot people, the question still remains why
all political parties are against the agreement
with the Troika and want the program to end
as quickly as possible. This is particularly puz-
zling for those parties towards the left of the
political spectrum, which should be defending
the interests of the less privileged people and
the truly working classes. Indeed, progressive
political parties and mass-media should be call-
ing for an even tougher adjustment program.
The reason that this is not happening is that the
measures in the agreement with the Troika are
against the privileged classes which are benefit-
ing from distortions and are supported by state
spending. Specifically, these privileged classes
include people working for, or more generally
benefiting from spending by, the public sector
and state enterprises and those benefiting from
monopolistic or corrupt practices. Their exag-
gerated incomes deny substantial resources
from, and reduce the standard of living, of the
more numerous but less privileged citizens.
The privileged groups are strongly represented
in all political parties which, in turn, champion
their interests. Escaping from this stronghold to
implement a far-reaching reform agenda along
the lines of the program agreed with the Troika
is essential for liberating the Cyprus economy
from its unproductive elements and allowing it
to find its way back to growth and realize its full
potential. This would lead to lower unemploy-
ment, rising productivity and growing wages,
and make possible a strong social welfare sys-
tem, high quality education and health services,
all of which should be the agenda of all political
parties, from left to right, irrespective of their
ideological differences.
Economic growth in the Eurozone, including
Cyprus, is likely to be lower for several years to
come than during the period prior to the crisis.
The challenge, therefore, is to implement an ag-
gressive structural reform program to maximize
growth prospects. This is particularly important
because of the heavy debt burden and high un-
employment. The choice is clear and it is ours.
And if we chose the road to reform we could be
a candidate to benefit from possible EU initia-
tives to alleviate the debt burden for successful
program countries.
The challenge, is to implement an aggressive
structural reform program to maximize growth
prospects.
In the short-term, the political crisis and eco-
nomic slow-down in Russia will impact nega-
tively the economy.

(TTIP) 20122262 USA AIFMD MARKET EFTA (QRTs) LAND ZONE MONETARY 2013/36/EE EUROPE HRB-68648

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