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One per cent of GDP to tackle crisis.

Byline: Jean Christou

(Category: news )

CYPRUS will spend close to one per cent of its GDP in tackling the global credit crunch, Finance Minister Charilaos Stavrakis said yesterday.

"A 10 per cent increase in the implementation rate of the development budget creates an additional liquidity of [euro]100 million for the Cypriot economy," Stavrakis said after a working lunch with EU ambassadors organised by the French embassy.

"So, with these two measures we are very close to spending 1.0 per cent of GDP to combating the crisis."

Stavrakis also said that the measures taken by other EU countries that amount to a total of some [euro]200 billion would also indirectly benefit Cyprus.

Pumping this money into European economies would help Cyprus, particularly in the area of tourism, which is expected to be worst hit by the international crisis.

Other than that, Stavrakis said the Cyprus economy was doing much better than the rest of Europe with full employment and a growth rate that was firmly in the black.

Growth this year is expected to reach 3.8 per cent.

And although 2009 growth has been revised to around 3.0 per cent from an initial 3.7 per cent, the Cyprus economy is still expected to outgrow the rest of the EU next year. The eurozone is now officially in recession.

"As Cyprus we are in a much better position than the rest of Europe. Cyprus has higher growth rates while the European economy has now entered negative territory," said Stavrakis.

"Nevertheless, we have responded to this call to raise more government spending in the economy with the recent package of [euro]52 million."

He also said the government has created a working group to increase the speed of implementation of the 2009 development budget, which Stavrakis said exceeded [euro]1 billion. A mere ten per cent increase in the level of implementation would create an additional [euro]100 million in liquidity into the economy, the Minister said.

Asked whether the government is planning a VAT reduction as announced by Brussels, Stavrakis confirmed that VAT in Cyprus was already the lowest rate aC" 15 per cent - dictated under the EU's plan.

"Therefore there is no room for further VAT reduction," he said.

"'We already have the lowest tax coefficients in Europe and therefore it would better that additional government spending to be utilised on infrastructure, which improves our competitiveness and creates additional jobs. This will cover the vacuum, possibly to be created by a reduction in the demand by foreigners for holiday housings."

Copyright [c] Cyprus Mail 2008

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Publication:Cyprus Mail (Cyprus)
Date:Nov 28, 2008
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