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Cyprus approves austerity budget aimed to exit recession

Xinhua, September 16, 2015 Adjust font size:

Cyprus has approved an austerity budget before it will exit its bailout program next year, which will lead it "for good" out of a three-year recession, Finance Minister Harris Georgiades said Wednesday.

Georgiades said that the deficit of the 2016 budget has been reduced to a level that will not require further austerity measures or new taxes.

Cyprus started a three-year economic adjustment program under a 10 billion euros (11.30 billion U.S. dollars) bailout offered by the Eurogroup and the International Monetary Fund early in 2013. It is expected to exit its bailout agreement next March.

"We have completely reduced the deficit, but the important thing is that this very positive trend of fiscal consolidation occurs without any need for new measures and new taxes," said Georgiades.

But he warned that there will be no relaxation in the rational management of public finances even after Cyprus exits the bailout program.

However, he said that a 5 percent increase in development expenditure is provided by the budget, which will help the economy to definitely leave recession behind.

He said his ministry estimates a growth of well over 1 percent this year, well above the projection by international lenders, and expects a further growth of 1.4 percent in 2016.

"Growth in 2017 will be over 2 per cent," said Georgiades.

Cyprus recorded 11 consecutive quarters of recession since 2011, that forced it to seek a bailout in 2012, after have been shut out of international markets.

The budget provides for revenue of 5.937 billion euros, an increase of 1.3 percent relative to 2015, and an expenditure of 6.092 billion euros, up by 1.4 percent relative to this year's spending.

The Cypriot economy has performed well above the projections by international lenders during its three-year adjustment program.

The eastern Mediterranean island has drawn about 6 billion euros in financial assistance and may not need the entire amount of its bailout.

Georgiades said his ministry plans to return to international markets for financing its budget by the end of the year. (1 euro = 1.13 U.S. dollars) Endit