Cyprus Minister of Labour and Social Insurance Harris Georgiades projected an “even deeper recession” and increase in unemployment and announced that his Ministry will reconsider all social transfers and programmes in a bid to alleviate social consequences of the economic crisis.

Georgiades chaired a meeting on Wednesday aiming at “coordination and mobilization to tackle the state of emergency in the most efficient way under the circumstances.”

The Cypriot economy is projected to shrink by 3.5% in 2013. However, a recent Eurogroup decision to impose losses on depositors of Bank of Cyprus, Cyprus largest lender, and for the winding down of the island’s second bank, Cyprus Popular Bank, as a prerequisite for a 10 billion financial assistance package, is expected to dramatically shrink the island`s banking sector in what has been described as a shock to the economy.

“It is understood that the economic figures will deteriorate even further. The economy, already in recession, will enter into deeper recession. And unfortunately unemployment, already in record levels will rise even more,” Georgiades said in statements following a meeting.

“In this adverse economic environment, the Ministry of Labour has commenced an effort for the coordination and mobilization to face the state of emergency in the most efficient way under the circumstances,” he added.

Georgiades noted that the Ministry aims to identify ways which will encourage businesspeople to keep employees to their jobs, create even more jobs and at the same time will identify ways “to alleviate the painful social consequences of the economic crisis through the Ministry’s programmes.”

The Minister however cautioned that things will be difficult for the state’s services due to the limited capabilities of the public sector.

“Nevertheless with the prioritization of issues, the identification of priorities and the redesign of the Ministry’s programmes we will try to tackle the situation with the best way under the circumstances,” he added.

Referring to social transfers, Georgiades said that as a result of the economic downturn the demands will rise whereas the resources will remain the same.

Responding to a question whether the unemployment allowance will change, Georgiades said he is not in a position to announce any decisions, adding that “we gave instructions for an urgent examination of all issues and for proposals so that decisions will be taken.”
“Everything will be discussed, everything will be examined without any absolute and indoctrinated approaches so we will find the best solutions under the circumstances,” he said.

Asked as to whether limitations to the influx of workers from other EU member-states will be considered, Georgiades said the derogations given to other EU member-states will terminated on December 2013, adding that there is no issue that will not be considered.

He added however that he would not like to give the impression that this issue could be settled easily as it concerns one of the fundamental pillars of the EU such as free movement of labour.

Excluded from international markets, Cyprus applied in June 2012 for financial assistance, after its two largest banks sought state aid, following massive write downs of their Greek bond holdings amounting to €4.5 billion or 25% of the island`s GDP, as a result of the Greek sovereign debt haircut.