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Cyprus News Agency: News in English, 11-12-02

Cyprus News Agency: News in English Directory - Previous Article - Next Article

From: The Cyprus News Agency at <>


  • [01] New austerity measures announced
  • [02] Broad consensus reached on economy, Stephanou says
  • [03] EU FMs urge Turkey to work for Cyprus solution
  • [04] Documents for 2nd licensing round being prepared

  • [01] New austerity measures announced

    Financial consolidation measures decided Friday at a meeting in the Presidential Palace aim at reducing fiscal deficit far lower than the target of 2.8% of GDP the state budget provides for, Minister of Finance Kikis Kazamias said.

    As Kazamias pointed out, with the latest measures we display our determination abroad, that we will put all our efforts until the end, to solve our fiscal problems on our own.

    He further noted that these measures provide a convincing answer to the EU that public spending will not increase in the coming two years, in order for Cyprus to focus on expanding its economic growth rate.

    Kazamias was also optimistic that Cyprus will avoid taking refuge at the European Stability Mechanism and noted that effort is being made to finalize the relevant draft bills by December 8.

    The Finance Minister was speaking to the Press, following todays meeting at the Presidential Palace, chaired by the President of the Republic and attended by political party leaders.

    As he noted, Cyprus obligation towards the EU, apart from approving the state budget for 2012, is to present a convincing medium-term program concerning its public finances.

    Speaking on growth, Kazamias said that outside estimates are not very positive and added that they must be disproved, since an increase in the growth rate by 1% equals further state revenue, worth 200 mln euros.

    He noted, moreover, that the tax collecting capacity of the state needs to be increased, while he added that beating tax evasion comprises the second pillar of todays decisions, along with the contribution of private sector workers. The third pillar, Kazamias said, is to focus on growth.

    As the Minister put it, if we resolve our domestic problems we will be better off to deal with and any external risks to our economy.

    Responding to questions, Kazamias explained that some measures will be forwarded to the House of Representatives immediately, to have the draft bills ready by December 8 and submit them to the House, along with the state budget.

    He added that a special committee, chaired by him and attended by party representatives, will discuss further measures, aiming to boost development. These measures, he said, may take more time to develop and may extend to the beginning of next year.

    Asked whether Cyprus is going to avoid the European Stability Mechanism, Kazamias stated he was optimistic. On another question concerning the role of trade unions, the Finance Minster expressed his respect towards the movement and said that the role of trade unions never comes to an end, adding that dialogue with the social partners can not last for too long, especially in present times.

    Amid the continuing financial crisis and the weak growth of the Cypriot economy, projected at a mere 0.2% GDP in 2012, the government introduced a series of austerity measures that would enable Cyprus to meet its medium term commitments to the EU and particularly for a budget deficit of 2.8 GDP in 2012 and a zero deficit by 2014.

    On August 27 the Parliament approved the first fiscal consolidation package with a fiscal impact of 1% GDP or 180 million EUR, while a bill for the increase of VAT rate to 17% from 15%, which would yield an additional 140 million euro to the state coffers, is pending for approval.

    The Cabinet also approved a second fiscal consolidation package, incorporated in the 2012 state budget, which would reduce the budget deficit below the 3 per cent Euro area benchmark (2.8%) in 2012. The package provides for the abolition of 939 vacant positions in the public sector, a 10% reduction of the starting salary of civil servants, the introduction of income criteria for the better targeting of welfare spending such as child allowance and student allowance (100 million EUR).

    On November 18 the Finance Minister introduced a third fiscal consolidation package aiming at restoring Cyprus` credibility in the international markets. The package provides for the freezing of salary increases in the public sector (including COLA) for two years, with a yield of 355 million EUR, a scaled contribution of high earners in the private sector and the introduction of a 0.5% levy on the turnover of companies with local activities for two years.

    According to the EU` new economic governance provisions, Cyprus must take concrete steps for the correction of its public finances. Otherwise a fine of 0.2% GDP will be imposed.

    [02] Broad consensus reached on economy, Stephanou says

    A broad consensus was reached in a series of issues during Friday`s meeting on the economy which took place at the Presidential Palace, under President of the Republic Demetris Christofias. The meeting was attended by Minister of Finance Kikis Kazamias and political party leaders and representatives.

    In statements after the meeting, Government Spokesman Stephanos Stephanou said that a broad consensus and convergence of views was reached in a series of issues. He explained that the first issue is the contribution of employees of the broad public sector by freezing salaries for two years.

    The second point relates to the increase of the tax rate on profits from 17% to 20%, while a third point concerns the revision of taxation on immovable property and integrating of all relevant taxes. There was also convergence of views as regards the ratification of a bill concerning the increase of the standard VAT rate from 15% to 17% with the beginning of the social dialogue for a more just redistribution of COLA with an aim to conclude the dialogue within six months.

    [03] EU FMs urge Turkey to work for Cyprus solution

    Turkey must work to support a Cyprus settlement and open its ports to the Republic of Cyprus as it has committed to do, Foreign Ministers from eleven EU member states stress.

    In an article in the euobserver, entitled ``The EU and Turkey: steering a safer path through the storms`` the Foreign Ministers point out that a Cyprus settlement would have benefits extending well beyond the island, from aviation safety to more efficient EU/NATO co-operation.

    ``Turkey must also work to support a Cyprus settlement, and open its ports to the Republic of Cyprus as it has committed to do``, they underline.

    The Foreign Ministers note that negotiations on a comprehensive settlement of the Cyprus problem have now reached an intensive phase and add ``we welcome the commitment of President Christofias and Dr Eroglu to work within the UN framework for a successful outcome``.

    [04] Documents for 2nd licensing round being prepared

    The documents that will form the basis of the Call for Interest in a second round of licensing for the remaining blocks of Cyprus Exclusive Economic Zone (EEZ) are currently being worked out, according to the Minister of Commerce, Industry and Tourism, Praxoulla Antoniadou.

    The Minister said that by the end of December the documents will be sent to the EU for translation, and then they will be published in the official gazettes of the EU and the Government of Cyprus.

    A three-month period will be given to interested companies, to prepare and submit their proposals, according to an EU Directive, Antoniadou explained. At the end of this period, the Ministry will process the Expressions of Interest submitted and will then proceed to negotiations on the basis of the criteria provided by the EU Directive and Cyprus legislation.

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