Cyprus passes 2010 budget, deficit at 4.5% of GDP

Cyprus's parliament on Thursday approved the 2010 state budget which sees the island's deficit exceeding a 3.0 percent of GDP EU limit imposed on members of the euro zone.
Thirty-three MPs from AKEL, the Democratic Party, the Movement of Social Democrats EDEK and the Movement of Ecologists and Environmentalists voted in favour of the budget, while 19 MPs from the Democratic Rally and the European Party voted against the budget, except the funds for certain chapters concerning defence and health.

Furthermore, an MP from EDEK voted against a sum of EUR9.5 mln for the radiotherapy unit in Limassol.
The budget has a EUR1.78 bln financing gap; spending of EUR 8.64 bln on revenue of EUR 6.87 bln. Both spending and revenue figures were adjusted higher than the draft Finance Minister Charilaos Stavrakis presented to parliament on Dec. 10.
Authorities expect the island's deficit to hit 4.5 percent of GDP next year in the worst-case scenario of diminishing earnings. The best case scenario is for the shortfall to be kept at the euro zone limit of 3.0 percent by clamping down on tax evasion and windfall earnings from title deeds on previously unlicensed real estate.
Cyprus represents about 0.2 percent of the economy of the euro zone, which it joined in 2008. It slid into a recession in the second quarter of 2009 on a slump in the real estate market and declining earnings from tourism.
The European Commission expects the island's economy to return to 0.1 percent growth in 2010 after a forecast contraction of 0.7 percent in 2009. It also expects a 2010 deficit of 5.7 percent, larger than that forecast by the finance ministry.