The Cyprus government reduces the size of the state budget

08.10.2013

October 28 The government and the Central Bank of Cyprus awaiting official visit of the delegation of representatives of the Troika of international lenders to the Republic. The topic of the forthcoming negotiations will be conducting the second phase of the financial and economic evaluation of Nicosia and the allocation of the second tranche of the package of financial aid.

This is the reason for a close examination of the Troika of the draft law on the 2014 budget. According to the Minister of Finance of the Republic, the bill requires reduction of the state budget by an average of 10% to a level that is not exceed 5.5 billion EUR, so that the budget deficit was reduced to 500 million EUR by 2014. Thus, by 2016, the Government intends to create a primary surplus, part of which will be aimed at restoring the island's status in the international markets.

The reductions provided by the memorandum signed with the Big Three, suggest reduction of social benefits, salaries and pensions in the public sector by 3%, levy a special levy from all employees, increase the size of contributions to a social insurance by 1% and the VAT increase by 1% .

Based on:

http://www.mof.gov.cy/mof/mof.nsf/All/967B393837E6A4FBC2257BFF0037546A?OpenDocument&highlight=%CE%A0%CF%81%CE%BF%CF%8B%CF%80%CE%BF%CE%BB%CE%BF%CE%B3%CE%B9%CF%83%CE%BC%CF%8C%CF%82%202014

Expert’s opinion

At the moment, Cyprus is trying to rehabilitate from the crisis of spring. After the first tranche past more than half a year, and to get the second tranche of financial aid Cyprus should meet a lot of conditions and show certain financial indicators.

And the government is in the standard way: spending cuts in wages, increase in VAT and social contributions under social deductions because particularly rely on the profitability of the economy right now is not necessary.

It is not easy to say how much it is feasible and how it can help. Wages in the public sector rather high and is unlikely that the deduction will be so essential, which will cover all the needs of the Ministry of Finance

Irina Lomakina ( The director of the Moscow office of Honest & Bright)