SWEEPING cuts to public sector wages and pensions and tax hikes are the likely targets for reforming the island’s shattered economy according to a leaked Troika delegation document.
The draft document, obtained by InBusinessNews, outlines a series of painful measures including a 15 per cent cut to the state payroll by 2013, a 10 per cent cut in benefits, and the abolition of public sector wage indexation, also known as the Cost of Living Allowance (CoLA).
According to the document, all civil servants will be made to contribute towards their pensions and will also have their salaries frozen until the end of 2015.
13th salaries in the public sector will also be axed.
In an effort to increase state revenues, the document outlines a series of tax hikes on property, alcohol, tobacco, and petrol. A one per cent increase on VAT to 18 per cent is also likely.
In addition, the Troika is also looking for continued efforts for fiscal consolidation, reducing the island’s deficit to 4 per cent of GDP in 2012 and to 2.5 per cent in 2013 and beyond by reducing the growth in spending on social services and state payroll.
In the leaked document the troika emphasises the need to improve tax collection, the administration of the public sector and the rationalization of the social benefits system.
Although Cyprus has asked Russia for a further €5 billion, Russia’s Finance Minister Anton Siluanov has said that a loan agreement with Cyprus was unlikely to happen in the near future.