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The Cypriot government could not find sufficient backing to pass an emergency fiscal package meant to avert a bailout like that of neighbouring Greece.With little means to control a budget deficit that could reach 6% of GDP this year, might face a debt crisis on par with the ones raging in Portugal, Ireland, or Greece, according to the Financial Times.
Unsurprisingly, the minority communist government could find little support for the deal, which would have resulted in $360 million in immediate tax increases and major spending cuts next month.
The tax package might not be completely dead — legislators have called for more details and want to add amendments to the plan. It’s unclear how significant an impact changes will have on the bill.
Former president George Vassilou said the country “faces huge dangers” if it does not immediately reform its finances. He told FT that refusing to pay public sector works for a 13th month and disposing of index-linked pay increases would be a good way to start accomplishing that aim.