Cyprus gov't submits bailout package counter-proposals

Cyprus government has submitted to international lenders counter-proposals on a bailout package, hoping to get an agreement before a crucial Eurogroup meeting in November, Finance Ministry sources said on Tuesday. The counter-proposals were finalized after President Demetris Christofias met union leaders on Monday afternoon in a move to avoid a Greek-style social strife. Unions representing both public and private sector employees have voiced strong reservations about measures included in the package, mainly abolition of a 13th salary, scrapping a salary system indexed to the cost of living. Government spokesman Stefanos Stefanou said in a late night statement after the meeting that the detailed proposals of the government would be sent immediately to the "troika" representing the European Commission, the European Central Bank and the International Monetary Fund and its negotiators would be invited to Cyprus to negotiate the bailout package. The troika negotiators had submitted a package in July providing for the generation of savings in the public sector totaling almost 1 billion euros (1.3 billion U.S. dollars), after Cyprus requested funds to recapitalize its banking system, severely hit by the Greek debt crisis. Stefanou said the government's counter-proposals will generate the amount asked by the troika, but do not include abolition of either the 13th salary or the Cost of Living Allowance (CoLA system of wages). They also provide for staggered cuts in the public payroll ranging from 6.5 percent to 12.5 percent for salaries over 1,000 euros, and also make no mention of privatization of profitable semi-state companies. The spokesman said President Christofias had promised union leaders he would try to have the payroll cuts accepted by the troika as voluntary contributions so that pension rights of people employed in the wider public sector would not be affected. He said it is up to the troika to announce when its negotiators will be back in the island to complete the bailout negotiations and said there is ample time to do that until the Nov. 12 Eurogroup meeting in Brussels. "The message we want to send ... is that we want to negotiate with the troika sincerely and with determination and to reach an agreement the soonest," Stefanou said. The Eurogroup is expected to examine and endorse support packages for Spain, Greece and Cyprus. Failing to catch the November Eurogroup meeting would jeopardize approval of the measures by national parliaments as elections are due in some countries, mainly in Germany. Any bailout agreement between the Cyprus government and the troika also has to get the approval of the local parliament where opposition parties muster a majority. Opposition parliamentary parties have submitted their own counter-proposals to the government but it is not clear to what extend they have been included in the package passed to the troika. Economic analysts have voiced concern that some of the government's counter-proposals may not be accepted by the troika and also warned about the bailout amount which has not been fixed. Bank recapitalization needs have been estimated at as much as 10 billion euros, an amount that would add 60 percent to the sovereign debt. (1 euro = 1.30 U.S. dollars)