Cyprus Gets Revised Draft of Bailout Agreement, CyBC TV Reports

Cyprus has received a revised draft of the bailout agreement from international creditors that calls for 1.2 billion euros ($1.5 billion) in spending cuts, state television CyBC reported.

The International Monetary Fund, the European Central Bank and the European Commission expect Cyprus to agree to scrapping the so-called 13th salary for government employees next year, a timetable for privatizations, and eliminating the government allocations to the Social Insurance Fund. The more than 7 billion-euro government debt to the Social Insurance Fund that pays pensions to workers at private companies will be written off, the Nicosia-based channel said today, without disclosing how it got the information.

Cyprus, which in June became the fifth euro-area country to request international rescue, will also have to cut public sector salaries, pensions, and the lump sum received by civil servants upon retirement as well as to freeze wage indexation for the duration of the adjustment program, CyBC said.

The island’s government believes that the public debt will remain sustainable even after Cypriot banks, which wrote down more than 4 billion euros on Greek government bonds, receive 9.5 billion euros in fresh capital, CyBC television said.

The east Mediterranean island will also have to overhaul supervision of its cooperative saving banks, CyBC reported and added that only viable cooperatives will receive fresh capital.

To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net;

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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