Cyprus faces default ‘within days’

Nicosia AFP-JIJI

Cyprus could default on loan payments due this month unless it can reach an agreement on a bailout with international lenders within days, a government official said Monday.

“If in the coming days the state is unable to secure €250 million to €300 million ($330 million to $395 million), then the state will proceed to default on payments,” Finance Ministry official Christos Patsalides told a parliamentary committee.

Patsalides said the government had no “plan B” if it fails to reach an agreement on a bailout.

The cash-strapped government wants to dip into the pension and provident funds of semigovernment organizations as it has nowhere to turn to secure such amounts on a short-term basis.

Patsalides said the government needed a total of €20 million to meet its needs but that €170 million had been secured from “external sources.”

A troika of lenders — the European Commission, European Central Bank and International Monetary Fund — is reviewing Cyprus’ request for EU financial aid, which is expected to go before the eurogroup on Jan. 21. But it would take weeks before Cyprus sees its first tranche of money.

An independent assessment is being carried out on how much the Greek-exposed banking system needs to boost liquidity. But the final report is due in mid-January, meaning extra funds must be found in the meantime.

Nicosia has pushed through a tough austerity measures to meet troika demands in making more than €1 billion in cuts and savings. The four-year adjustment program represents 7.25 percent of gross domestic product.

Parliament has approved public sector salary cuts ranging from 6.5 percent to 15.5 percent, a freeze on index-linked wages until 2016 and extended emergency salary contributions in the private and public sector.

Benefits have also been slashed while taxes on cigarettes, alcohol and gas have all gone up.