Cyprus slashes spending in first post-bailout budget
NICOSIA Dec 19 (Reuters) - Cyprus's parliament approved its first post-bailout budget on Thursday, which slashes annual spending by 10 percent in a three-year austerity drive overseen by international lenders.
In a show of hands, the 2014 budget was passed with 30 lawmakers in favour in the 56 member-parliament, who are members of Cyprus's centre-right governing coalition. Members of the communist party AKEL voted against, and socialist EDEK party abstained from the vote.
The budget estimates spending at 7.75 billion euros ($10.59 billion) and revenue at 7.96 billion euros.
Cyprus came to the brink of bankruptcy last March, when it faced a cash crunch from years of fiscal slippage and a banking system deeply exposed to losses in Greece.
The state was forced to shut down an insolvent bank and seize deposits to recapitalise a second troubled lender for 10 billion euros in aid from the EU and IMF. It was the first time in the history of the euro zone that the process, known as a "bail-in", uses depositors' funds to recapitalise banks, instead of money from the taxpayer.
"We now have before us a tough and painful adjustment program, and we are determined to stick to it," said Averof Neophytou, head of the right-wing Democratic Rally Party. "It is the only way to correct the economy."
In addition to spending cuts, authorities say they will pursue a privatization schedule of the state telecoms, electricity and ports authorities. They have ruled out new taxes, worried about an additional burden on an economy poised to contract 7.7 percent in 2013 and by about 4.4 percent in 2014.
Privatizations are stringently opposed by left-wing parties. "This adjustment program does not permit growth, or a comprehensive social policy," said Andros Kyprianou, head of the opposition AKEL party.
His party, in power until elections last February, has openly advocated ditching the euro. Cyprus adopted the common currency in 2008.
Most of the 10 billion euros in aid is being used to service debt and plug deficits, with 1.5 billion euros channelled toward recapitalising Co-Ops, which are small lenders.
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