Cyprus state budget cuts to reach 700 mln in 2014

Expenditure deductions in the 2014 state budget will reach 700 mln in an attempt to reduce the public sector deficit to 0.5 bln euros, Finance Minister Haris Georgiades said on Thursday.

Speaking at the 17th annual conference of Overseas Greek and Cypriot Organisations, the Minister said that the government seeks to reduce the 2014 state budget by 10% and not exceed 5.5 bln euros in order to bring deficit down to 500 mln and ensure primary surplus by 2016, which will in effect help Cyprus return to the international markets.

Georgiades said that the government does not intend to impose new taxes, underlining that its policy focuses on cost containment. “We had excessive borrowing and unsustainable credit expansion and at the same time a state which spent more than it should,” he noted.

He described the adjustment program Cyprus has agreed on with its international lenders (EU Commission, IMF and ECB) as a “very difficult and ambitious” one, stressing however that the government will stick to it.

“We want to limit next year’s budget by more than 10%. This is not easy but this is what we will pursuit, ensuring also stability of tax yields and thereby the prospect of attracting new investments and encouraging entrepreneurship”, the Minister explained, adding that as soon as the government will gain control of public finances and reduce the expenditures it will lower tax burdens.

He also said that the state would make structural changes, such as the new social welfare policy, a new healthcare plan and an "ambitious" reform of the public sector.

Georgiades noted that Cyprus' banking sector is stabilising by the day and underlined that the government is trying to facilitate and encourage economic activity and investment.