Cyprus will make cuts in public spending worth 923 million euros ($1.2 billion) over three years if the budget is approved by lawmakers on Dec. 15, said government spokesman Stefanos Stefanou.
Revenue will increase by 249 million euros next year and spending will be cut by 461 million euros, narrowing its deficit by 710 million euros, Stefanou said in an e-mailed statement. Spending will be cut by 158 million euros in 2013 and by 2014 revenue will rise by 264 million euros while spending will be reduced by 659 million euros.
The east Mediterranean island aims at reducing the fiscal deficit to 2.5 percent of gross domestic product next year from “around 6 percent” this year, Stefanou said. The budget gap will narrow to 0.5 percent of GDP in 2013 and will be eliminated in 2014, he said. The budget cuts are aimed at preventing the euro area’s third smallest economy from resorting to an international bailout.
“The challenges our banking system faces because of the negative developments in the Greek economy are expected to affect growth,” the island’s finance minister Kikis Kazamias told lawmakers today, according to an e-mailed transcript of his budget speech. “Following the writedowns in Greek debts, Cypriot banks will throw less liquidity to the market in an attempt to maintain adequate capital.”
The Cypriot economy will grow 0.2 percent next year, he said.
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