Cyprus krijgt vier jaar om gebalanceerd budget te ontwikkelen (en)

BRUSSELS - Cyprus has four years to implement austerity plans and reach a balanced budget, according to a leaked copy of the terms of the bailout being prepared between Cyprus and its international creditors.

A 24-page Memorandum of Understanding (MoU) disclosed in Cypriot press on Monday (1 April) sets out a detailed programme of reforms including tax rises, spending cuts, privatisation of state assets and healthcare and pension system reforms.

In its implementation of the 2013 budget, the Cypriot government will be required to find an additional €351 million in tax rises and spending cuts.

The MoU states that reining in the Cypriot budget is "of overriding importance in order to stabilise the economy and to restore the confidence of companies, citizens and foreign investors in the longer-term economic prospects of Cyprus."

The original MoU between Cyprus and the Troika was drafted in November 2012 but the actual bailout was only agreed in March after a new centre-right government came to power.

The latest document, which sets out a four year programme for Cyprus from 2013-16, includes a 3 percent cut across the board to all public sector wages and pensions.

The Cypriot government is also expected to draw up plans to cut the number of civil servants by 1,800 by 2016, while the retirement age will go up by two years to 65.

Meanwhile, as part of a series of tax increases, Cyprus is meant to raise its corporate tax rate to 12.5 percent and its VAT to 19 percent.

Together with higher consumption taxes, even winners of the country's national lottery will feel the pain, with a 20 percent levy on all winnings over €5,000.

The Cypriot stock exchange is expected to re-open this week for the first time since talks on a rescue package began in earnest two weeks ago.

Last week the government put in place strict capital controls on all bank transfers in and out of Cyprus, alongside a €300 limit on daily cash withdrawals, in a bid to prevent a flight of capital from the country.

According to the European Commission's Winter Forecast released in February, the Cypriot economy is expected to shrink by 3.5 percent in 2013.

However, analysts fear that the controls will remain in place for months and could lead to a deep recession of between 5-15 percent. This would potentially derail the €10 billion bail-out deal and lead to a restructuring of Cyprus' debts.