Cyprus's parliament on Friday approved a deficit-busting budget, slashing proposed state spending and drawing the fiscal shortfall below the government's stated target of 2.5 percent of gross domestic product next year. In a show of hands lawmakers approved the budget by majority. Its approval was delayed for a day after a civil servants strike over a government-sponsored austerity package and last-minute cost-cutting by MPs.
MPs cut government-proposed expenditure for next year by about 8 percent. As the government-proposed 2012 budget stood, it projected a deficit of between 2.4 and 2.5 percent of GDP. The fiscal shortfall is expected to hit 6.0 percent this year. "We hope this (additional cuts) will bring the deficit to below 2.0 percent next year," said Nicholas Papadopoulos, chairman of parliament's finance committee.
The Mediterranean island is the third-smallest economy in the euro zone and has suffered a series of ratings downgrades this year from fiscal slippage and exposure of its banks to Greece. Fitch, which rates Cyprus BBB, on Friday placed the island on a Rating Watch Negative along with Belgium, Spain, Slovenia, Italy and Ireland. Cyprus has been unable to access international markets since May because of high yields on its already traded debt. The island has announced a 2.5 billion euro loan from Russia to help refinance debt maturing next year.
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