Cyprus’ negotiating team and the Troika mission visiting the island will meet today, a meeting which may prove decisive for the course of the negotiations in the context of Cyprus` application for financial assistance from the EU bailout mechanism.

The meeting comes in the wake of an agreement in principle on the island`s financial sector reached yesterday, following lengthy negotiations between Troika representatives of the European Commission, the European Central Bank and the International Monetary Fund and the Central Bank of Cyprus.

The Cypriot negotiating team, composed of Ministers of Finance, Labour and Commerce, as well as Undersecretary to the President and Government Spokesman, met yesterday to review the new proposals submitted by the Troika. The team ascertained that progress has been made but there is disagreement on policy issues.

According to information, Troika demands that the government implements measures securing a total of €1.2 billion in three years, compared with its earlier proposals of €975 million.

It also demands that the Cost of Living Allowance freezes for three years and a 50% slush of the allowance be introduced thereafter. The government proposes a three-year freezing on the COLA, clarifying that it will not be granted if the economy enters a recession.

Troika also seeks to abolish the government contribution of 4.3% to the public sector pension fund and a write-down of the government debt to the Social Security Fund totaling €7.2 billion. The government disagrees with the proposed reform.

Another area of discord concerns the income from the exploitation of natural gas reserves discovered in the island`s Exclusive Economic Zone, with the Troika proposing that the income should be used to pay off Cyprus’ debt and the government arguing that this revenue should be deposited in a natural gas fund. The government proposes that only one third of the income be used for debt repayment, one third for growth and infrastructure and one third for the future generations.

One of the thorny issues is the demand for the privatization of the profit-making semi-governmental organizations. The government disagrees with this prospect, saying it has drafted a plan for the privatization of the loss-making organizations.

 

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