AKEL caution over austerity plan

CYPRUS’ bid to join the euro zone in 2007 has been called to question by senior government coalition partner AKEL, which advocates caution over rash moves to cut deficits.

A government austerity plan to improve public finances must not be to the detriment of public living standards, a member of AKEL said yesterday.

“If to join the euro zone in 2007 we will be obliged to take painful austerity measures, it won’t be the end of the world if (joining) occurs in 2008, or even 2009,” said AKEL deputy Stavros Evagorou.
Cyprus faces a forecast budget deficit of 4.2 per cent of gross domestic product this year.

It must reduce this to below 3.0 per cent of GDP by 2007 and cut a present bulging public debt of 72 per cent to below 60 per cent.

“It would be very easy to reduce the deficit, but the question is if the methods would be desirable… we do not believe in shock therapy,” Evagorou told Reuters.

The finance ministry has not given many details of its austerity plan, pending contacts with parliament on getting as many parties on board as possible to back its proposals.

AKEL has however made it clear it would not back any attempt to raise taxation, like VAT.
The drive is expected to focus on scaling back on payroll and pension expenses by increasing the retirement age in the civil service and introducing a freeze on salaries.

In addition the government will be more vigorous in pursuing tax evasion and increase fees for services offered to the public.

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.