According to Reuters, citing a memorandum of understanding (MoU), only Cyprus’ President Nicos Anastasiades and parliamentary speaker Yiannakis Omirou will be allowed to fly business class under austerity measures the government agreed to with international lenders in exchange for a 10 billion-euro bailout. The ban on business class travel for government employees will not apply to transatlantic flights.
Senior government officials will also lose the right to buy duty-free cars and all state officials and parliamentarians will have wages frozen until 2016.
Nicosia is to reach a primary budget surplus of 204 million euros or 1.2% of GDP and 4% from 2017 onwards.
The document also states the deficit targets in nominal terms and as a percentage of GDP in the MoU imply that international lenders expect the Cypriot economy to contract almost 8% this year against 2012, shrink again by around 3% in 2014 and return to around 1% growth in 2015 and 2016.
The MoU said Cyprus would raise at least 1.4 billion euros from selling state-owned assets. The document stated the island has excellent prospects for increasing its revenues from tourism and it could earn a lot of money from selling natural gas.
To improve public finances, Cyprus will freeze public sector pensions and raise the retirement age for the government pension scheme by 2 years, as well as raise duties on alcohol, tobacco and petrol, increase value added tax, corporate tax and the tax on interest earnings and dividends.
Cyprus plunged into the crisis as its banks were seriously affected by devaluation of Greek governmental bonds. Island’s banking sector needs to be recapitalized. The EU agreed to allocate a 10 billion bailout but the country should partly offset the means using its own sources.
Initially it was planned to levy all the deposits, however Cyprus’ parliament rejected the bill. Instead of it the government decided to recapitalize the banking sector. As a result the depositors at
Bank of Cyprus and Cyprus Popular Bank (Laiki Bank) lose a large sum of money, Laiki will be closed.