After the ascertainment of the House Finance Committee that Cyprus remains into a difficult financial situation with the recession to be prolonged and look deeper in 2014, the Plenary of Parliament of Representatives begins at 16:00 in the afternoon to discuss the first State Budget that was drawn up, based on the commitments undertaken by the Republic of Cyprus under the Memorandum of Understanding.
The state budget will be voted on Thursday, after the completion of the all-day discussion before the Plenary of Parliament.
Based on the Report of the Parliamentary Finance Committee, the majority members of the Finance Committee consider that the Republic of Cyprus does not have the ability to bring in a new loan and therefore it should proceed to implement the programs, only in the context of the provided financing loan agreement.
The majority members of the Finance Committee also consider that in order to regain the credibility of the Republic and a soon come back to the markets, a strict compliance to the memorial commitments is assumed.
The report states that members of the Finance Committee disagree with the notion that the Memorandum is the only option, considering the fact that the government should be constantly seeking for alternatives, even compared to the implementation of the Memorandum, as well as ways of unblocking from it.
In addition, Finance Committee is reserved in relation with its final size, which may be differentiated on the basis of specific budget cuts as well as its overall costs, in the light of the approval or rejection of the amendments that were tabled or may be brought in by the government for implementation of government commitments, regarding savings or other social costs.
Based on the Report of the Parliamentary Finance Committee, the State Budget of 2014 provides incomings, excluding the financial flows of 5,639 billion, compared with revised incomings of $ 5,637 billion in 2013. This means that a marginal increase of 0.02% is expected.
The total estimated appropriations excluding the financial flows, of the Budget 2014, amounts to 6.616 billion compared with 7.005 billion in 2013. This shows a decrease of 5.5%.
The GDP (at current prices) is projected for 2014 to reach 15,952 billion compared to 16,423.9 billion in 2013 and 17,720 billion in 2012.
The fiscal deficit, based on the predictions for 2014, is projected to reach 1,121 billion and as a percentage of GDP to 7.1 % compared to 8.4 % of GDP that the original macroeconomic scenario had predicted.
The fiscal deficit for 2013 shows a significant deterioration and is estimated at 114.3% of GDP and in absolute numbers up to 18,767 billion. During 2014 the public debt is projected to deteriorate even more, reaching 19, 631 billion in absolute numbers and as a percentage of GDP at 124.4 %, according to the updated macroeconomic scenario and to 123.1 % according to the original macroeconomic scenario.
As it is mentioned in the Report of the House Finance Committee, in accordance with the updated macroeconomic scenario, in 2014 the unemployment rate is expected to be increased further and reach 19.8 % of the workforce, while according to the initial macroeconomic scenario it was estimated at 19.5 % of the workforce.
The Finance Committee further notes that the financial needs of Cyprus economy for 2014 will be covered mainly through a loan agreement with the ESM, while there will be a renew of the short-term loans and debt instruments that were issued for recapitalization purposes of Laiki Bank.
In the Report of the Finance Committee, the Committee finds that there was also a delay in the completion of the loan agreement with the ESM, which aggravated the economic situation, the negative performance of the banking system and the dramatic increase in the capital needs of banks, also led the public finances to a limited situation, since our economy is perfectly attuned with the Cypriot banking system.
