‘No sur­prises’ in 2015 bud­get ap­proval

Financial Mirror (Cyprus) - - FRONT PAGE -

A slim majority of MPs was ex­pected to vote through the gov­ern­ment’s bud­get for 2015, with the main fo­cus be­ing cut­backs, re­cover and re­form.

De­spite harsh crit­i­cism from the op­po­si­tion AKEL, the smaller so­cial­ist EDEK and the cen­tre-right DIKO, the for­mer coali­tion part­ner was ex­pected to ap­prove the bud­get with reser­va­tions.

The bud­get could only pass through the 56-stea House with the 20 votes from the rul­ing DISY, the sin­gle EVROKO vote and at least five of the eight DIKO deputies. In­de­pen­dent Zacharias Kou­lias, who is ex­pected to re­join the ranks of DIKO after be­ing ex­pelled by for­mer party leader Mar­ios Garoyian, de­clared ear­lier that he would vote against the bud­get.

The main fea­tures of the bud­get are aligned with the obli­ga­tions un­der the mem­o­ran­dum of un­der­stand­ing (MoU) with the Troika of in­ter­na­tional lenders, who are some­what up­set that the pack­age of mea­sures on fore­clo­sures had been held up since Oc­to­ber.

AKEL said it would vote against the bud­get be­caise “it is the im­ple­men­ta­tion of the un­pop­u­lar Troika and gov­ern­ment tar­gets”, sim­i­lar to words from EDEK, the Cit­i­zens’ Al­liance and the Greens.

DIKO said it wanted some of the terms Mem­o­ran­dum with the Troika to be rene­go­ti­ated.

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The bud­get was pre­sented by Fi­nance Min­siter Haris Ge­orghi­ades on Thurs­day and the de­bate started on Mon­day with the read-out of the House Fi­nance Com­mit­tee re­port, which said that the eco­nomic en­vi­ron­ment re­mained “dif­fi­cult” de­spite the pro­jec­tions of the Min­istry of Fi­nance.

The re­port ac­knowl­edged the pos­i­tive course of pub­lic fi­nances, the re­duc­tion of the cost of bor­row­ing and the up­grade of the econ­omy by in­ter­na­tional rat­ing agen­cies, as well as the fact that the gov­ern­ment should con­tinue the path of re­forms.

Ge­orghi­ades kicked off the par­lia­men­tary de­bate around his re­servedly op­ti­mistic bud­get for 2015, by call­ing on all par­ties to co­op­er­ate, while say­ing that next year will be one of re­cov­ery, re­forms and changes.

He also warned that “nei­ther the slo­gans, nor a re­jec­tion will ever rid us of the Troika” of in­ter­na­tional lenders, pos­si­bly ad­dressed to op­po­si­tion par­ties Akel and so­cial­ist Edek that sug­gested al­ter­na­tives to the in­sol­vency bills.

The state ex­pects rev­enues of EUR 5.9 bln and ex­pen­di­ture of 6.6 bln, with a mod­est growth rate of 0.4% pre­dicted for 2015, 1.6% in 2016 and 2% in 2017.

“We took over an econ­omy un­der col­lapse and to­day we have an econ­omy that is re­cov­er­ing,” Ge­orghi­ades said in his sec­ond an­nual bud­get speech since the present ad­min­is­tra­tion took over amid na­tional eco­nomic

a melt­down in March 2013.

The min­is­ter had ear­lier said that the bank­ing sec­tor was cru­cial to the eco­nomic re­cov­ery, but that ob­sta­cles re­mained, such as the de­lay in the pack­age of in­sol­vency bills, linked to the other bill on fore­clo­sures, which AKEL wanted its im­ple­men­ta­tion de­layed by six months and EDEK un­til Jan­uary 1.

Ac­cord­ing to the bud­get, in­fla­tion should reach 0.9% in 2015 and will climb to 1.3% in 2016 and 1.5% in 2017. Un­em­ploy­ment is ex­pected to peak at 17% in 2015 and fall to 15.8% the fol­low­ing year and to 14.4% in 2017.

The main sources of rev­enue are ex­pected to be di­rect and in­di­rect taxes, es­ti­mated at EUR 4.9 bln in 2015 or 83% of to­tal rev­enues. The rest con­cerns sale of goods and ser­vices, as well as trans­fers, es­ti­mated at EUR 999 mln.

The gov­ern­ment also hopes to gen­er­ate fresh rev­enue streams from its pri­vati­sa­tion roadmap that will see EUR 1.4 bln raised over the next four years from the sell-off of state as­sets, such as the tele­com and elec­tric­ity util­i­ties, as well as the Ports Au­thor­ity, that is ex­pected to be the first to get un­der­way by the end of 2015.

On the state bud­get’s ex­pen­di­ture side, pay­roll, pen­sions and bonuses con­tinue to make up the lion’s share, but could be slightly less next year at EUR 2.5 bln com­pared to 2.58 bln in 2014.

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