European Union expects more from Greek Cyprus

NICOSIA - Agence France-Presse

Greep Cyprus President Demetris Christofias (R) and European Commission President Jose Manuel Barroso (L) speak during a news conference. EPA photo

European Commission president Jose Manuel Barroso urged Greek Cyprus yesterday to swiftly come to an agreement on the terms of a bailout deal with international lenders to save the island’s Greece-exposed economy.

“I hope we can move rapidly to reach an agreement on the measures to be taken to guarantee a long-term sustainability of the Cypriot economy,” Barroso told reporters at a maritime conference in the southern port city of Limassol.

“I believe it is critically important now to come to some level of consensus.” Barroso urged political parties and trade unions to make the “huge effort” required for Greek Cyprus to meet the austerity challenge needed to put the recession-hit economy back on track.

Claims on new taxes

“I know the situation is difficult. The challenges are immense. They require a huge effort from the political system but it is critically important for the future of [Greek] Cyprus.” President Demetris Christofias is in negotiation with political party leaders and influential trade unions to aim for consensus on a counter package of milder cuts than those demanded by the troika of international lenders.

In a document leaked to the media, the government appears to be proposing to raise revenue through more taxation and less cutbacks over a longer period than proposed by the troika of lenders in EU bailout negotiations.

It hopes to cut the debt gap by slightly more than one billion euros ($1.28 billion) by the end of 2016 rather than the 975 million euros in mostly public finance cuts the troika seeks by 2015.

But the troika - European Commission, the European Central Bank and the International Monetary Fund - proposed remedy is 80 percent through savings in expenditure cuts and 20 percent via increased taxes.

Major opposition parties, the right-wing Disy and centre-right Diko, have yet to be convinced the government has got the formula right while unions are wary of job and pay cuts. Final negotiations with international lenders have stalled while Brussels awaits proposals from Nicosia as Christofias has said he will not sign a bailout deal that includes the scrapping of 13th salaries, index-linked wage adjustments and privatizing semi-government utilities.

Government spokesman Stefanos Stefanou said last week that Nicosia’s target is to have a memorandum signed with the troika before the eurogroup meeting on November 12 in Brussels.
Troika representatives have visited Greek Cyprus twice since June, when the country called for help after both the Bank of Cyprus and Cyprus Popular Bank said they could not raise funds to meet recapitalisation requirements. The troika reportedly wants to slash the Cypriot state payroll by 15 percent, shave 10 percent off welfare benefits, scrap the inflation-linked, cost-of-living allowance and roll back government-subsidised housing finance.