Cyprus 2011 deficit off track; won’t top 4.5% of GDP, says finmin

The public deficit rate will be worse than expected, according to a leaked government memo which the Finance Minister rejected saying Cyprus will meet its target of 4.5% of gross domestic product.
"We are confident we will meet our target of a 4.5% deficit or lower," Finance Minister Charilaos Stavrakis said on Wednesday, an improvement over 5.3% last year.
The minister refuted a memo leaked to the daily Phileleftheros suggesting that in a worst-case scenario the island’s deficit would rise to 6.0% of GDP.
"It is one of many such exercises that the finance ministry conducts," he told reporters, adding that senior finance ministry officials had disagreed with the assessment.
Stavrakis said the finance ministry maintained its forecast for 1.5% growth in 2011, mainly on a rebound in the tourism sector.
However, the opposition Disy deputy leader Averof Neophytou said that “when the Finance Ministry technocrats end up with such nightmarish conclusion about the economy and the government is living with the illusion that we have exited a crisis, our agony about the economy grows bigger by the day.”
Neophytou, a vociferous critic of the government’s economic policies, called on the Ministry of Finance and the national statistical service, Cystat, to release the relevant date for the first quarter of 2011.
The leaked memo also suggested that unless drastic measures are taken, unemployment will peak at 8% in 2011 and worse in 2012.
“The inability to take measures will lead to unpleasant developments for our economy, Neophytou said, adding that it is not yet clear what the government plans to do considering the upcoming European Commission projections expected on May 13.
He repeated criticisms of the past that instead of reducing the civil service by 1,040 people, a the ministry had suggested, the government workforce actually increased by 1,345.