Cyprus has to conclude a financial aid package with the European Union (EU) and the International Monetary Fund (IMF), Finance Minister Vassos Shiarly told local media on Sunday.
It was because the Mediterranean country has to pay dues amounting to over 1 billion euros (1.3 billion U.S. dollars), Shiarly told the leading newspaper Phileleftheros.
"The government not only has to pay salaries and other dues by the end of the year but also to repay short term bank loans which total more than 1 billion euros," Shiarly said.
Cyprus requested financial aid from the eurozone countries and the IMF in June to recapitalize its major banks, which have suffered heavy losses on account of their exposure to the Greek debt crisis, and also refinance its sovereign debt until 2016.
The amount needed to recapitalize the banking system has been estimated at between 4 and 8 billion euros, with a further 4.6 billion euros needed to refinance the sovereign debt.
Financial technocrats from the European Commission, the European Central Bank and the IMF submitted an adjustment program providing for cuts in public spending and increased revenue, totaling 975 million euros at the end of 2015.
However, Cyprus President Demetris Christofias said he wants the cuts to be spread over a four-year period to 2016 and vowed not sign a bailout package which would force the government to discontinue payment of a 13th salary and scrub a cost of living allowance system which ties salaries to inflation.
However, Shiarly hinted that the president had no choice but to meet the troika demands, though the troika may go along with the four-year adjustment period.
"The President of the Republic may not feel happy to sign an agreement which will lower the income of the working people, but at the same time he is fully aware of the responsibilities the state is faced with, mainly because of the need to recapitalize the banks, so not signing is out of the question," Shiarly said.
He added that there is still a divergence between the government and the troika negotiators on the recapitalization amount.
"An agreement will be finally signed, which will be hard on Cyprus, even if the country will not need the entire amount which will be fixed at the end of the negotiations," the Finance Minister said.
He expected the package to provide for cuts in salaries in the public sector, increase of some taxation and serious structural reforms in the public sector.
"There could be some changes here and there after consultations with the political parties and the social partners, but the targets will not be changed, because without achieving these targets there will be no loan," Shiarly said.
Christofias is expected to conclude on Monday a series of meetings with opposition parties on a package to be presented to the troika negotiators, who are expected to return to Cyprus within the next few days to finalize a bailout agreement.
A deal has to be signed on Nov. 12, when the next Eurogroup meeting will be held in Brussels to consider the Cyprus request.
A public opinion survey published in a local newspaper on Sunday said 61 percent of the population was in favor of a bailout agreement as they consider it to be the only way out of the economic and financial crisis plaguing Cyprus.
The survey said that this majority included 47 percent of the left wing ruling AKEL party, which supports the president in his stance against a tough austerity package.