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27 August 2011

FT: Cyprus approves emergency fiscal package


Greek Cypriot opposition parties teamed up to push emergency fiscal measures through parliament, amid fears that Cyprus could become the next eurozone member to seek a bail-out from its partners.

Deputies approved a package of tax increases late on Friday night but postponed a decision on a proposal to increase VAT by two percentage points to 17 per cent.

Cyprus is heading for a budget deficit above 6 per cent of GDP this year, and its banks are heavily exposed in Greece. Its central bank warned last month that unless austerity measures were adopted and market confidence restored, Cyprus faced could follow Greece, Portugal and Ireland into a full-blown debt crisis.

Kikis Kazamias, finance minister, said on Friday he would present another €360 million package of spending cuts and measures to curb tax evasion by mid-September. It was not clear whether the watered-down package would be enough to avert another downgrade of Cyprus’s sovereign rating, analysts said. Standard & Poor’s has put Cyprus on negative credit watch after cutting its rating to BBB plus. Fitch this month downgraded Cyprus by one notch to BBB.

Full article (FT subscription required)



© Financial Times


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