The Cypriot government held constructive talks with international creditors today and is working to reach a bailout agreement as soon as possible, Finance Minister Michael Sarris said.
“We are seeking ways to cut spending and raise revenue to ensure the sustainability of our debt,” Sarris told reporters in Nicosia after attending a meeting with President Nicos Anastasiades and officials from the European Commission, European Central Bank and International Monetary Fund, the so-called troika that oversees euro-area bailouts.
Cyprus’s new government, voted in on Feb. 24, has revived talks on a bailout that could equal the size of its 18 billion-euro ($23.6 billion) economy. Cyprus became the fifth euro-area country to seek financial assistance after its banks suffered losses of 4.5 billion euros in Greece’s sovereign debt restructuring.
Topics broached today included options that have come up in public discussions on how to ensure Cyprus’s debt sustainability, including state asset sales and the possibility of raising the corporate tax rate to 12.5 percent from 10 percent, a Cypriot official said on condition of anonymity because the talks are in progress. Asset sales would be carried out in the next couple of years, the official said.
Sarris renewed Cyprus’s opposition to imposing losses on depositors in the country’s banks.
“I personally believe and most of them know that such a move -- even discussing a haircut, something that hasn’t happened anywhere -- carries huge dangers,” he said. “Here in Cyprus we have paid a high price already just because there’s talk about this issue.”
The euro area has so far refused to exclude the possibility of imposing losses on bank-account holders in Cyprus as a way to prevent its debt from becoming unsustainable following a rescue. This element isn’t part of existing aid packages for Greece, Ireland, Portugal and Spain.
Revenue from investments in the energy industry can help the economy, Sarris said. There will be no further wage or pensions cuts and selling any stake in the Cyprus Electricity Authority is off the table, he added.