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Cyprus Confident Bailout Deal Imminent

by Ulrika Lomas,, Brussels

01 November 2012

Finance Minister Vassos Shiarly has confirmed that Cyprus is very close to reaching an agreement with a troika of international creditors on a multi-billion-euro bailout to save its Greece-exposed economy.

The government has been in consultation with other political parties and labour groups to agree to a package of spending cuts and tax measures to secure the rescue funding which is estimated to amount to EUR12bn (USD15.5bn) to EUR13bn.

The government hopes to cut its debt by a little over EUR1bn by the end of 2016 as opposed to the troika - the European Commission, European Central Bank and the International Monetary Fund - who have requested a EUR1bn cut by 2015. The government is proposing to service the debt in a ratio of 60:40 expenditure cuts to tax rises. The troika has proposed an 80:20 ratio.

Austerity-driven tax rises have already seen value-added tax jump 2% to 17%, with the government discussing another rise in VAT. Income tax, investment taxes and property tax have also risen.

Cyprus became the fifth euro-zone country to request a bailout, when it was forced to recapitalize its banking system this June. The government has been reluctant to sign a deal that would impose harsh cutbacks and has been supported by French President Francois Hollande, who during a meeting with Cyprus President Dimitris Christofias last week, urged other European leaders not to impose draconian measures on Cyprus in return for aid.


TAGS: tax | investment | European Commission | banking | offshore | offshore banking | Cyprus | Greece | European Union (EU) | Europe

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