NICOSIA Oct 4 Cyprus has proposed deeper
savings than those put forward by the island's international
lenders, but wants more time to pay its bailout off, draft
proposals seen on Thursday show.
Cyprus sought aid from the European Union and the
International Monetary Fund in June after its two largest banks
took overwhelming losses on their lending to Greece and turned
to the state for financial support.
International lenders discussing economic aid to Cyprus have
asked for a cumulative 975 million euros in savings over a
four-year period. In counter-proposals leaked on Thursday, the
Cypriot government has asked for a five-year adjustment period,
until 2016, with measures totalling 1.01 billion euros ($1.30
billion) in savings.
The island, one of the smallest in the 17-nation euro zone,
has been unable to borrow from international markets for more
than a year because of the high borrowing costs implied by
yields on its traded debt.
A document of Cyprus's cost saving recommendations leaked to
media on Thursday was to be discussed by party leaders on Friday
in a meeting with the president.
Cyprus counters proposals by lenders to cut public-sector
salaries by 15 percent over a two-year period, favouring a more
The government has suggested a scaled reduction in
public-sector salaries on earnings between 1,001 and 3,500 euros
monthly by nine percent, and 11 percent on earnings exceeding
It has also suggested a 10 percent reduction in entry
salaries in the civil service and a freeze in increments.
It will request public and private-sector employees to file
one percent of their income to a "social cohesion fund"
initially, raising to 2 percent in 2014 and 3 percent
The government also pledges to increase value added tax by
one point to 18 percent, freeze pensions, increase tax on
tobacco and alcohol and raise the contribution made by
public-sector employees towards their pensions.
There is no provision for abolition of an inflation-linked
wage indexation which the troika sought, scrapping end-year
13th-month salaries in the public sector, or privatisations.
Cypriot President Demetris Christofias on Wednesday ruled
out signing any memorandum which would include these.