THE government yesterday announced additional spending cuts worth €360 million and measures to fight tax evasion, with the parliament plenum convening on Friday to discuss and vote on austerity measures to shore up the economy.
Finance Minister Kikis Kazamias outlined the government measures before the House Finance Committee in a bid to win lawmakers’ support for a €750 million austerity package the opposition – currently holding the majority in parliament — has already branded as inadequate.
The minister said the government intended to cut some €200 million through better targeting social transfers and an additional €160 million through other cuts that were not specified yesterday.
Kazamias also announced measures to fight tax evasion such as making receipts mandatory in all transactions – an obligation affecting both the recipient and the person who pays.
“We think that approval of the bill will bolster the state’s ability to clamp down on tax evasion,” Kazamias told MPs.
Changes will also be made to the law on personal data to make it easier to track down tax evaders.
The minister also pledged to table proposals, as soon as possible, designed to boost growth.
Kazamias urged parties to approve the austerity package already submitted by the government in an effort to avert further downgrades from ratings agencies that will add to the country’s fiscal woes.
“Potential rejection of the package proposed by the government without offering serious indications on which way we are heading may create negative impressions to those who are watching us,” the minister said.
Moody’s Investors Service downgraded Cyprus on July 27 to Baa1, while Standard and Poor’s has said it may downgrade its equivalent BBB-plus rating. Fitch Ratings cut Cyprus to BBB on August 10, one notch below rival agencies.
Although it rarely issues international bonds, Cyprus has seen its borrowing costs surge on the back of repeated rating downgrades because of fiscal slippage and exposure of its banking sector to Greek debt.
But opposition lawmakers appeared unconvinced by the minister, with committee chairman, DIKO MP, Nicolas Papadopoulos saying “we expected to hear more.”
Papadopoulos said some had hoped to see the government submit bills or at least give a solid timeframe but instead MPs heard vague talk about cuts in public spending.
Opposition parties want cuts in the public payroll, beyond the ones announced by the government following discussions with state workers’ unions.
The austerity package provides for a 3.0 per cent contribution for at least three years plus a 1.25 per cent contribution to the widows and orphans fund.
MPs have accused the government of backtracking on a deal with parties calling for a 4.0 per cent contribution by civil servants towards their pensions and changes to the system of calculating their pensions.
Currently, civil servant pensions are based on their last salary before retirement with many even getting promoted just before.
Parties want pensions to be based on the last 30 months of service, but the minister yesterday made it clear to them that passing such a provision without the agreement of the workers would be unconstitutional.
He also told MPs that he was close to a deal with the unions to make the 3.0 per cent contribution permanent — a development that could tip the scale towards the approval of the package.
“It is almost agreed,” Kazamias said.
On the 30 months issue, the minister said he was working on alternative ways, including cutting promotions 12 months before retirement.
It had been expected that discussion on the austerity package in the plenum would be held today but it was decided to move it to Friday with opposition parties possibly tabling amendments.
Papadopoulos said more time was needed so that the package was “improved and enriched” especially the part regarding cutting state spending.
More time was also needed for “potential amendments submitted” by parties and for the government to conclude its consultations, Papadopoulos said.
