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No More Time Left on Austerity Measures - Neophytou

cyprus economyOpposition deputy leader Averoff Neophytou has sounded another alarm bell over the slow pace of austerity measures needed to cut the deficit and reduce state spending.

Citing Moody's latest downgrade of the Cyprus sovereign bond to Baa3 from Baa1, Neophytou said that it was time the government dealt with the situation before the island's investment grade is cut down to junk status.

"The time for big decisions for the economy is now. There is no margin for further delays," he said.

The second package of austerity measures that Finance Minister Kikis Kazamias promised to the House of Representatives should be tabled without delay, said Neophytou.

"It is not possible for all to warn of the worst consequences when the government does absolutely nothing...it should try at least to save what can be saved," he said.

Amid the fall of the current government in Greece over staggering debt levels and a sluggish economy, analysts say that the Cyprus state has to move quickly to avoid similar economic and political consequences.

In August, a package of austerity measures was passed by MPs, including a three percent rise in pension contributions from public sector employees and a rise in income tax from 30 to 35 percent on salaries over 60,000 per year.

This was seen only as a first step in structural and budgetary reforms, but the second step has yet to be taken, although Kazamias has announced that the finance ministry is currently studying new measures. He faces entrenched resistance - after taking initial bold steps, Kazamias has adopted a more conciliatory attitude towards state trade unions which have threatened to strike over any further attempts to cut the state payroll and expenses.

Further austerity measures were expected in the 2012 Budget submitted to the House last month, but this too was slammed by the opposition, which currently has a majority in Parliament. There is really only one austerity measure agreed on by all parties that is included in the budget, which is that VAT will rise from 15 percent to 17 percent. Otherwise, spending on state salaries is projected to rise by three percent in 2012, instead of an anticipated reduction in view of the economic crisis in Cyprus and Greece. This would wipe out any savings gained by freezing the Cost of Living (CoLA) allowance which reflects a pay rise according to inflation.

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