The first tranche of the financial assistance to be agreed between Cyprus and the Troika of the European Commission, the European Central Bank and the International Monetary Fund will be disbursed by the end of the December, Cyprus Minister of Finance Vassos Sharly has said.
Sharly, who briefed on Wednesday the President of the House of Representatives and the representatives of the parliamentary parties on the 2013 state budget, announced that the budget will be submitted to the parliament on October 20 and will incorporate the government austerity measures to be proposed to the Troika.
Cyprus applied on June 25 for financial assistance from the EU bailout mechanism to recapitalize its banking sector severely hit by the haircut of the Greek sovereign debt and to secure its refinancing needs. So far the Troika auditors have visited Cyprus twice, while the Memorandum of Understanding associated with the granting of the financial assistance is expected to be finalized in the Troika’s next visit to the island.
"No date has been set," Sharly said replying to questions.
"The timeframe is very narrow, we do our utmost," he said, noting the fact that the Cabinet convened on a public holiday and convenes again today to finalise the government proposals to the Troika shows that "we understand the pressure and we work rapidly towards implementing this programme."
According to sources, the government will propose to the Troika representatives private sector scaled salary cuts for wages above €1,500 as well as public sector scaled salary cuts for wages above €1,500, a 1% VAT increase to 18%, taxation on luxury cars and on cigarettes and alcohol, as well as a penalty on public sector employees who wish to retire early.
Responding to questions, Sharly referred to the process to be followed with regard to the agreement on the adjustment programme between Cyprus and Troika noting that the capital to be used for the state’s refinancing needs and the recapitalisation of the banking sector will be provisional and will be defined following a detail process, which will be completed approximately two months following the agreement with the Troika on the adjustment programme, as was the case of Spain.
The Central Bank of Cyprus has assigned Pimco to carry out a due diligence for the Cypriot banking sector that would determine the banking sector capital needs.
He also said that after the adjustment programme is agreed, the programme will be referred to the Eurogroup, adding that the first financial assistance disbursement will take place after the agreement on the Eurogroup level and the approval by the parliaments of the Euro area member states.
"If we follow this procedure we reach at the end of December," he added.
Replying to a question whether Cyprus has enough capital to operate until December, Sharly said "we are satisfied that we will be able to operate in that framework."
On his part, House President Yiannakis Omirou said the 2013 state budged will reflect the agreement between the Troika and the government.
"The memorandum will be taken into account and will be reflected in the state budget,” he said.
