In large part, and according to the analysis of the ratings agencies, these downgrades are due to the fact that as a country we have not yet taken the fiscal consolidation measures that our government and our parliament agreed were necessary to implement last year. It is a very costly delay as it raises the cost of financing of our public debt, it raises the cost of financing by private business, and it reduces employment and growth opportunities. There are things that can be done in order to reverse this. The policies that could reverse this deteriorating situation are well known, and they involve shoring up the long-term public finances of the Republic. So I repeat, all authorities must live up to their responsibilities. Q. Would you give me specific examples on how you believe the structural problems in the Cypriot economy can be addressed? We hear a lot about fiscal consolidation but what exactly should be done? I could mention a couple of the things that were already agreed by our parliament and government last year which unfortunately have not been implemented as of yet, with the associated damages from the delay. The most obvious I believe, because it has been repeatedly mentioned, is the sustainability of our pension system.
Our government has repeatedly over the past year stated that the current state of our pension system is, I quote, “a ticking time bomb which could destroy the Republic.” This is something that can be fixed by changing the parameters of the pension system going forward. Everybody recognises that these changes need to be made in order to ensure the sustainability of the system and the longer our country delays making these changes the more costly it will be to solve the problem. This is one example that is recognised. I do not think we have to look very far. In my view, it is not the most responsible policy not to defuse what has been recognised as a ticking time bomb. Q. How worried are you at the unfolding fiscal situation on the island and the inaction on the part of the authorities? I am indeed worried about our government’s delay in implementing the necessary fiscal consolidation measures because, as I mentioned earlier, any further delay raises the cost to the economy. The unemployment rate is already at historic highs. We do not help the economy generate additional growth and new jobs by not correcting the fiscal imbalances  BIS central bankers’ speeches  5  that we face. The fiscal imbalances push up the cost of financing on businesses and discourage investment. I am quite worried about this. 6  BIS central bankers’ speeches