Central Bank takes aim at Cyprus' state payroll
Source: Agencies |
October 26, 2010, Tuesday
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THE governor of Cyprus' Central Bank said yesterday that bigger cuts to the government payroll are needed now to curb a growing fiscal deficit, warning that further delays could entail painful wage and pension rollbacks like those in crisis-hit Greece and Ireland.
Athanasios Orphanides says the 2011 budget fails to adequately slash the state wage bill, which represents around 30 percent of all government spending.
The official said Central Bank projections suggest that the budget deficit for 2010 may "noticeably" exceed a government forecast of six percent of GDP. He said the 2011 budget wrongly put the emphasis on a five percent reduction in infrastructure spending instead of tackling the state wage bill which is estimated to grow by about two percent.
"Fiscal policy of this nature neither corresponds with nor contributes to the sustainable economic development of this country," Orphanides told a parliamentary committee.
He warned that the Cypriot economy's rebound from a 1.7 percent contraction in 2009 to growth of 0.4 percent this year and 1.8 percent in 2011 won't be enough to fix the island's fiscal problems.
The east Mediterranean country is a European Union member and began using the euro in 2008.
Athanasios Orphanides says the 2011 budget fails to adequately slash the state wage bill, which represents around 30 percent of all government spending.
The official said Central Bank projections suggest that the budget deficit for 2010 may "noticeably" exceed a government forecast of six percent of GDP. He said the 2011 budget wrongly put the emphasis on a five percent reduction in infrastructure spending instead of tackling the state wage bill which is estimated to grow by about two percent.
"Fiscal policy of this nature neither corresponds with nor contributes to the sustainable economic development of this country," Orphanides told a parliamentary committee.
He warned that the Cypriot economy's rebound from a 1.7 percent contraction in 2009 to growth of 0.4 percent this year and 1.8 percent in 2011 won't be enough to fix the island's fiscal problems.
The east Mediterranean country is a European Union member and began using the euro in 2008.
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