Modern Business

Rating agency Standard and Poor put the government of Cyprus on a credit of watch list with negative implications last Wednesday. It was done as a reaction to the parliamentary rejection of two proposals to reduce public debt.

“Rating Standard and Poor` s putting the long-term credit ratings of the Republic of Cyprus at `A +` on credit watch list with negative implications, “said international rating agencies. “Short-term credit monitoring following the rejection of the legislative branch on July 9, 2010 from two government proposals to raise revenue,” S & P credit analyst Trevor Cullinan said. The majority of members of parliament rejected government proposals to increase corporate taxes by one percent to 11 percent and increase the levy on the ownership of large properties that will generate annual revenues of 90 million Euros. Parliament said the government must cut bloated salaries alone before trying to raise taxes.

“We doubt whether the government will be able to encourage through fiscal consolidation measures are sufficient to overcome the significant decline in public finance,” added the rating agency. Cyprus must reduce the fiscal deficit of six per cent of GDP to below the upper limit of the European Union, three percent in 2012, which means the need to reduce a deficit of 500 million Euros in two years. This country has been under strict supervision for the excesses of the European Union deficit rules.

Finance Minister Charilaos Stavrakis has warned MPs on Tuesday that the government refused to step increase in receipts will get into hot water with Brussels and rating agencies. Nicosia plans to cut 700 public sector jobs this year and trying to save 140 million Euros in spending cuts ministries, while the salaries of ministers and MPs have been cut 10 percent.