Cyprus eyes state cutbacks to cut growing deficit

Greek Cyprus will draw up comprehensive proposals in the next two weeks for reducing a rising budget deficit.

Cyprus eyes state cutbacks to cut growing deficit

Greek Cyprus will draw up comprehensive proposals in the next two weeks for reducing a rising budget deficit that is thought to have hit almost 6 percent of GDP last year, well above the euro zone ceiling of 3 percent.

Greek Finance Minister Charilaos Stavrakis declined to give details of the plan but said on Thursday that one proposal being considered was to trim the benefits of senior state officials.

"If there is some reduction in the payroll or (government expenditure) it would be natural to start from the very high earners ... but I want to stress that there is nothing specific on this issue," Stavrakis told journalists.

Greek Cyprus, which represents about 0.2 percent of the euro zone economy, has seen a significant fiscal deterioration in the past year on a collapse in earnings from real estate and tourism.

Finance ministry estimates put the 2009 deficit at almost 6.0 percent of gross domestic product, and the last European Commission forecasts -- prepared some months ago -- show the shortfall hitting 5.7 percent in 2010.

Authorities have previously said they need to save some 500 million euros a year to bring the deficit down to 3.0 percent. Some measures under consideration, like a drive to stamp out tax evasion, require parliamentary approval which could take time.

Greek Cyprus has a presidential system of government.

"Importance has been placed on reducing the operating expenditure of the public sector because these are measures which do not require approval from parliament and (political) parties," Stavrakis said.

Greek Cyprus, normally used to buoyant growth, slipped into recession in the second quarter of 2009.

Stavrakis said the economy looked set for a recovery in the second half of 2010 on the back of a rebound in euro zone economies and in Russia, a key business partner.

Reuters

Last Mod: 04 Şubat 2010, 20:06
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