A Simple Guide To The Troika Demands For A Cyprus Bailout
Mar 1st 2013, 2:46 pm
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A Simple Guide To The Troika Demands For A Cyprus Bailout
For people who are thinking of moving to Cyprus, here is a general list of the Memorandum Of Understanding list the Troika are seeking to implement.
The draft memorandum proposes extensive changes and reforms in the state system and banking system. The key points in the document - which was leaked to the media after it was given to political parties - are below.
The Banks
1. The banking sector will need around 10 billion euros in recapitalisation funds and will be under stricter regulation regarding liquidity and investment concentrations.
2. There will be a new definition of 'non-performing' loans that will include all loans that have not been serviced for 90 days.
3. By December 2013, there will be a central credit register which banks can use to identify borrowers who are in arrears on their loan payments.
4. Members of the boards of directors serving on the large banks will be independent and subject to restriction on the loans they can take on a personal or business basis. Any board members in arrears on their loans will be removed from the boards on which they are serving.
5. Co-operative banks will be required to report their income statements and balance sheets to the Central Bank and these will be published as statistical reports.
6. Co-operative banks will follow the same rules as commercial banks and will be supervised by the Central Bank by the end of June 2013, instead of the Ministry of Commerce as they are currently.
7. Asset Management Companies will be set up to buy up bad debts and loans, and these debts will be transferred after approval from the Central Bank. They will be re-sold as bonds.
8. Anti-money laundering rules will be strengthened and extended to crimes including tax fraud, and the Central Bank will have to become more rigorous in its supervision into companies or individuals that are suspected of money laundering.
The State
1. Salaries will be reduced by 12.5% for those earning 4001 euros per month; by 11.5 percent for those earning 301-4000 euros per month; by 9.5% for those earning 2001-3000 euros per month; by 8.5% for those earning 1501-2000 euros per month; and by 6.5% for those earning 1001-1500 euros per month. Those earning 0-1000 euros will not have pay cuts.
2. Cost of Living Allowance freezes will be extended until the end of 2015.
3. Salary freezes will be extended until the end of 2016.
4. The state payroll will be reduced by 5000 employees by the end of 2016.
5. Revenue through property taxes will be increased by updating 1980's prices as follows:
Value: EUR 0-150,000 taxes at 0%.
Value: EUR 150,001 - 500,000 - taxes at 6%.
Value: EUR 500,001-1,000,000 - taxes at 8%.
Value: EUR 100,001 and above - taxes at 10%.
6. A bank levy will be increased from 0.095% to 0.11% on deposits.
7. Educational and family benefits will be reduced by 113 million euros through abolishing mother's allowance; lowering Easter allowance for pensioners; housing schemes by 35 million euros and discontinuing the special grant for refugees for the first house purchase.
8. Allowances given to senior government officials receiving pensions will be taxed.
9. Allowances given to public sector employees will be reduced by 15%.
10. Daily allowances for business trips will be reduced by 15%, and reduced by 50% when lunch is offered during business trips taken by civil servants.
11. State officials' right to travel first class will be suspended with the exception of transatlantic travel. The president and house speaker will be retain this right, however.
12. Duty-free vehicles for state officials will be abolished.
13. Public sector pensions will be frozen and retirement ages will increase by two years.
14. Lump-sum retirement benefits to army and police officers will be reduced.
15. Cigarette taxes will go up by 0.20 cents per package of 20.
16. Duties on beer will rise by 25%, from 4.78 per hl to 6.00 euros per hl.
17. VAT will rise to 18 percent, from 17% in 2013 and to 19 percent in 2014.
18. OPAP winners will pay a 20 percent tax on winnings.
19. Public services fees will increase by at least 20 percent.
Semi-government Organisations
1. State-owned enterprises will be listed in an inventory and considered for divestment, liquidation, privatisation or restructuring, depending on the financial health of the company in question.
2. By the end of 2013, state-owned enterprises will have to reduce their running costs by at least 15 percent versus 2010.
3. If ncessary to restore debt sustainability, the authorities will consider a privatisation programme for state-owned and semi-government organisations.
The Troika may well be back in Cyprus next week now that the new President is in power. This guide may help you in your preparations for moving to Cyprus.
The draft memorandum proposes extensive changes and reforms in the state system and banking system. The key points in the document - which was leaked to the media after it was given to political parties - are below.
The Banks
1. The banking sector will need around 10 billion euros in recapitalisation funds and will be under stricter regulation regarding liquidity and investment concentrations.
2. There will be a new definition of 'non-performing' loans that will include all loans that have not been serviced for 90 days.
3. By December 2013, there will be a central credit register which banks can use to identify borrowers who are in arrears on their loan payments.
4. Members of the boards of directors serving on the large banks will be independent and subject to restriction on the loans they can take on a personal or business basis. Any board members in arrears on their loans will be removed from the boards on which they are serving.
5. Co-operative banks will be required to report their income statements and balance sheets to the Central Bank and these will be published as statistical reports.
6. Co-operative banks will follow the same rules as commercial banks and will be supervised by the Central Bank by the end of June 2013, instead of the Ministry of Commerce as they are currently.
7. Asset Management Companies will be set up to buy up bad debts and loans, and these debts will be transferred after approval from the Central Bank. They will be re-sold as bonds.
8. Anti-money laundering rules will be strengthened and extended to crimes including tax fraud, and the Central Bank will have to become more rigorous in its supervision into companies or individuals that are suspected of money laundering.
The State
1. Salaries will be reduced by 12.5% for those earning 4001 euros per month; by 11.5 percent for those earning 301-4000 euros per month; by 9.5% for those earning 2001-3000 euros per month; by 8.5% for those earning 1501-2000 euros per month; and by 6.5% for those earning 1001-1500 euros per month. Those earning 0-1000 euros will not have pay cuts.
2. Cost of Living Allowance freezes will be extended until the end of 2015.
3. Salary freezes will be extended until the end of 2016.
4. The state payroll will be reduced by 5000 employees by the end of 2016.
5. Revenue through property taxes will be increased by updating 1980's prices as follows:
Value: EUR 0-150,000 taxes at 0%.
Value: EUR 150,001 - 500,000 - taxes at 6%.
Value: EUR 500,001-1,000,000 - taxes at 8%.
Value: EUR 100,001 and above - taxes at 10%.
6. A bank levy will be increased from 0.095% to 0.11% on deposits.
7. Educational and family benefits will be reduced by 113 million euros through abolishing mother's allowance; lowering Easter allowance for pensioners; housing schemes by 35 million euros and discontinuing the special grant for refugees for the first house purchase.
8. Allowances given to senior government officials receiving pensions will be taxed.
9. Allowances given to public sector employees will be reduced by 15%.
10. Daily allowances for business trips will be reduced by 15%, and reduced by 50% when lunch is offered during business trips taken by civil servants.
11. State officials' right to travel first class will be suspended with the exception of transatlantic travel. The president and house speaker will be retain this right, however.
12. Duty-free vehicles for state officials will be abolished.
13. Public sector pensions will be frozen and retirement ages will increase by two years.
14. Lump-sum retirement benefits to army and police officers will be reduced.
15. Cigarette taxes will go up by 0.20 cents per package of 20.
16. Duties on beer will rise by 25%, from 4.78 per hl to 6.00 euros per hl.
17. VAT will rise to 18 percent, from 17% in 2013 and to 19 percent in 2014.
18. OPAP winners will pay a 20 percent tax on winnings.
19. Public services fees will increase by at least 20 percent.
Semi-government Organisations
1. State-owned enterprises will be listed in an inventory and considered for divestment, liquidation, privatisation or restructuring, depending on the financial health of the company in question.
2. By the end of 2013, state-owned enterprises will have to reduce their running costs by at least 15 percent versus 2010.
3. If ncessary to restore debt sustainability, the authorities will consider a privatisation programme for state-owned and semi-government organisations.
The Troika may well be back in Cyprus next week now that the new President is in power. This guide may help you in your preparations for moving to Cyprus.
