By Stelios Bouras and Nektaria Stamouli
Cyprus must pass a series of austerity measures to clinch a deal
from international creditors or face a payments freeze due to a 80
million euro ($102.8 billion) budget shortfall, the country's
finance minister said Monday.
Finance Minister Harris Georgiadis said the eastern
Mediterranean island must rush through parliament in coming weeks
laws increasing taxes or cutting spending in a bid to seal the
EUR10 billion loan deal from euro zone peers and the International
Monetary Fund.
"We are currently at a borderline point," he told reporters
after addressing a parliamentary economics committee. "We cannot
hold on with this situation for much more without the lending
agreement."
The country has promised spending cuts and tax increases equal
to more than a tenth of its EUR17 billion a year economy through
2018 in order to meet budget targets its creditors set. Other
measures include raising retirement ages for public and
private-sector workers, cuts to health-care spending and raising
1.4 billion euros from privatizations over the next five years.
Last week, the IMF said it had reached a staff level, or
initial, agreement with Cyprus to unlock its portion -- about EUR1
billion--of the total loan agreement for the country, with formal
approval expected in early May. A final deal still needs the
approval of other euro-zone members, who are footing 90% of the
rescue, and are set to review its terms over the next two
weeks.
Rea Georgiou, Cyprus' Accountant General, said that country's
cash reserves stand at EUR85 million and that an additional EUR80
million is needed for the government to meet obligations, including
paying pensions and civil servant's salaries.
After two attempts at securing a bailout deal in March that
pushed Cyprus to the brink of exiting the euro, the country faces
major obstacles. To secure the aid, it agreed to wind down its
second-largest lender, Cyprus Popular Bank PCL, and radically
restructure the largest, Bank of Cyprus PCL (BOCY.CP).
Write to Stelios Bouras at stelios.bouras@dowjones.com; Nektaria
Stamouli at nektaria.stamouli@dowjones.com;