Cyprus civil servants, pensions could go unpaid

NICOSIA (AFP) - Civil servants and pensions in cash-strapped Cyprus could go unpaid this month because of a shortfall of at least 75 million euros (S$121 million) in government coffers, an official warned on Monday.

Finance Minister Haris Georgiades, meanwhile, cautioned that leaving the eurozone would take Cyprus back "centuries" and insisted the island has no "Plan B" for reneging on a 10-billion-euro bailout.

Accountant General Rea Georgiou told parliament's finance committee that the government was trying to avoid a payment default for the month of April.

"The cash deficit for April is 160 million euros. The 85 million in reserve is not enough and we need a similar amount to avoid a default," Ms Georgiou said, as the island awaits the first tranche of a eurozone bailout due in May.

Government spokesman Christos Stylianides told reporters the authorities were rushing to avoid a default on payments on state salaries and pensions, including pushing through additional bailout measures to raise funds.

"This government will do whatever is possible in the coming days to get bills passed relating to the (bailout) so we do not have a problem with salaries and pensions at the end of the month," he said.

Under the bailout deal struck with the European Union, European Central Bank and International Monetary Fund to prevent financial meltdown, Cyprus is obliged to drastically reduce the size of its bloated banking sector, raise taxes and downsize the public sector workforce.

Mr Georgiades warned there was no short cut out of the crisis such as leaving the European single currency.

"It's time to correct past mistakes. It's time to pay the bill. We can only spend what is in our pocket. There is no other option," he told the finance committee, which is investigating the causes of the unpopular bailout.

"It's a question of reality. Government instructions to the ministries will be to compile next year's budget essentially from scratch. Each item, each programme of the ministries must be explained and justified," Mr Georgiades said.

Addressing the committee earlier, central bank chief Panicos Demetriades blamed Cyprus's political leaders for the harshness of the terms of the bailout.

The terms of the final bailout, Demetriades said, was a "political decision" with the central bank left to carry the "institutional responsibility of addressing the painful situation".

"I understand there is anger and insecurity from the public. This is why I am here to present the facts with evidence, so everyone understands what really happened," he said.

Mr Demetriades, who has been widely accused of mishandling the bailout deal, also took aim at Eurogroup finance ministers.

He said it was their idea to impose losses on all depositors in the island's banks - large or small - in an initial plan that was angrily rejected by Cypriot MPs.

European Central Bank chief Mario Draghi last week accused Cyprus of handling the bailout poorly, describing as "not smart" the initial plan to impose a "haircut" on all depositors.