FINANCE minister Harris Georgiades said that Cyprus is not facing another real estate bubble, adding that the government is prepared to further help banks reduce their non-performing loan stock by improving the responsiveness of the judiciary.

“Neither the European Central Bank nor the International Monetary Fund would agree with you that we are heading towards a new property bubble,” Georgiades said in an interview on Thursday. “In fact, they take a view which is quite different – that the (price) fall hasn’t even been completed. And I would specially say that this is the view of the ECB”.

“I wouldn’t agree with the one extreme or the other, nor with the view that there will still be a further significant drop in property prices, nor I would say that that a new property bubble is imminent,” Georgiades said. “I would, in fact, take a middle-ground approach on this issue, essentially saying that the downturn of the sector has bottomed out, that we are seeing early signs of recovery, but I do not expect that circumstances will repeat themselves so as to fuel another bubble”.

According to Central Bank of Cyprus data, home prices fell from April to June a quarterly 0.4 percent. Home prices in Cyprus, which peaked in the third quarter of 2008, have dropped since almost 31 per cent on average. In July, the parliament passed a government bill offering tax breaks to property transfers, in an attempt to boost demand for real estate, which add to existing incentives offered to foreign investors, including a residence permit or, depending on the size of an investment, the Cypriot citizenship.

“What we are interested in is a stabilisation of the property sector,” Georgiades said, adding that a “significant stock” of properties, including holiday homes, apartments, and other commercial properties, would not allow another real estate bubble.

According to the latest building permit figures posted by Cystat, the area of new residential projects approved by local authorities was in the first eight months of the year 22 per cent more, compared to a year before.

Georgiades said that Cypriot banks will not need to enter a third round of capital increase as they can further strengthen their capital basis through profitability.

Even following last week’s request of an additional capital injection of up to €200m by the bailed-out Cooperative Central Bank, which administers 18 independent cooperative savings banks, “I do consider that our banks have been extensively recapitalised,” Georgiades said in an interview. “I believe that, since the climax of the banking crisis, we have made huge progress and attained satisfactory capital adequacy, enabling the banks to operate and strengthen their capital adequacy through their operations and organic profitability”.

The Cooperative Central Bank increased its provisions by €527m to €3.4bn in the third quarter of 2015, which is half of its 90-days-past-due loan portfolio.

While the bank, with a capital adequacy ratio of 12 per cent and a non-performing loans ratio of almost 60 per cent in September, meets “both existing and anticipated future higher capital ratios,” the government expressed both its “willingness and capability” to help the lender, the finance minister said. “There is no capital shortfall, it is in fact a demonstration of the strength of the Co-op that it has been able to increase provisions”.

In 2014, the government injected €1.5bn into the cooperative banking sector as part of Cyprus’s bailout agreement. Georgiades said that the government is already in consultations with the European Commission’s Directorate General Competition concerning the planned capital increase at the cooperative banks.

The finance minister said that the government is prepared to take further steps towards helping the courts, which are known for their culture of delay and may have to deal with an increase in cases concerning foreclosures and insolvency after the relevant laws were put in place earlier this year, function “quickly, smoothly and credibly”.

“I do not restrict it solely to the foreclosure and insolvency processes,” he said. “In general, we want an efficient and credible judiciary as a key element of what [Cyprus] offers as a business services centre”.

The government, which exempted the judiciary from a general public sector hiring freeze, part of a wider fiscal consolidation effort, created or facilitated the creation of additional posts of judges, he said. “We are creating, as of January 1, a new administrative court that will relieve the burden from the existing court processes. And we are investing in e-justice, a transformation of the judiciary from the unacceptable paper files to an information technology-based operation”.

Therefore, the Finance minister said, he sees the glass as “half-full” with respect to non-performing loans, which make out roughly half of the banking system’s loan portfolio, exacerbated by the 2013 banking crisis and bank holiday, with the subsequent imposition of capital controls, and a prolonged recession. “All these factors have since been addressed,” he said.

Still, even as the economy started to recover, banks beefed-up their internal divisions dealing with loan restructurings, and authorities put in place a new legislative framework, which included the lifting the title-deed deadlock, the introduction of banking mediation and the enabling of loan-sales, non-performing loans may take time to drop as “there is no quick-fix solution,” he cautioned.

The finance minister added that he remains “optimistic” about the economy, which started to grow in the first quarter of the year after 14 consecutive quarters of contraction. “My confidence, however, is based on a very important prerequisite: that we shall continue along the path of continuously promoting reforms and structural changes, of maintaining discipline, of maintaining a business-friendly environment, and of maintaining the effort to strengthen the banking sector”.