FINANCE Minister Kikis Kazamias yesterday said that the House approval of the 2012 budget gave them reason to hope that the state would be able to sort out its finances.
“I feel we have the right to hope that we will now be able to handle the in-house financial situation more easily,” Kazamias said.
On Friday the House approved the budget after delaying the discussion for a day so that lawmakers could prepare amendments.
Discussion was then originally scheduled for the morning, but pushed back to the afternoon. But with furious background negotiations and discussions as deputies scrutinised funds and amendments the plenum only finally convened at 7pm.
The budget was passed with support from AKEL, EDEK and DIKO while DISY, EVROKO and the Greens voted against.
There were about 70 pages of amendments to the proposed budget.
The house approved an 8 per cent cut in the state’s operational expenses amounting to a bit less than €120 million, the head of the House finance committee Nicolas Papadopoulos told the Sunday Mail.
Aside of the cuts approved on Friday, measures passed on Wednesday introduced included a freeze in public sector salaries and postponement of the cost of living allowance payments, amounting to about €148 million of cuts.
In addition to the 8 per cent cut passed on Friday, a number of funds were ‘crossed’ or blocked. Papadopoulos said this amounted to roughly €80 million.
To access these funds the government will be forced to appeal to the House where the Finance Committee will scrutinise the request and decide whether they should be released.
“This will make (legislators’) life difficult because we will be obliged to go to them and sometimes asking them to urgently examine the government’s argumentation for freeing up funds,” Kazamias said.
“Yes, we will be very busy but what can we do? It’s our job,” Papadopoulos told the Mail.
The plenum’s meeting coincided with the Fitch credit ratings agency placing Cyprus on rating watch negative, an effective warning that a downgrade could happen soon. Fitch’s rating for Cyprus is currently at BBB, two notches above junk status. Fitch, which is expected to revise ratings by the end of January next year, said it might downgrade Cyprus and five other eurozone countries by one or two notches.
The finance ministry responded almost immediately saying that there were “currently no serious reasons causing particular concerns” given current austerity measures, approval of the 2012 budget as well as the state’s reduction and anticipation of financial needs for 2012.
However, the island which has had numerous downgrades and ratings warnings this year has limited financing options relying on a €2.5 billion loan from Russia to cover its needs.
Fitch also placed top-notch AAA France under a negative outlook estimating that resolving the eurozone crisis was “technically and politically beyond reach”.
Kazamias said that they would do their best to ensure the state was able to tackle systemic situations stemming from outside the island.
DISY’s Tasos Mitsopoulos who had voted against the budget told the state broadcaster yesterday that the government had brought Cyprus “one step before an EU bailout”.
Mitsopoulos said that the action of crossing funds allowed for better control of state spending but they were not spending cuts per se.
AKEL’s Giorgos Loucaides raised worries that the unanticipated large amount of blocked funds might create problems in the smooth functioning of the state machine.
The Greens criticised the budget for failing to focus on development while DIKO’s Fytos Constantinou and EDEK’s Nicos Nicolaides spoke of political responsibility in the face of dire financial times.
