Cyprus to pursue growth and austerity during its EU presidency

The government of Cyprus will rely on a combination of austerity measures and growth programs to dig its way out of a financial crisis that has forced it to turn to its European Union partners for aid, the Cypriot ambassador in Washington said Tuesday.

“We need to take measures to cut budget deficits and debts, but if we do that in a context where you do not pay attention to the need for growth, you are fighting a losing battle,” Pavlos Anastasiades told editors and reporters at The Washington Times.

“You have to have an austerity program together with a growth-based program so that you have the resources to fund other programs,” he said.

Cyprus had a budget deficit of 6.4 percent at the end of last year. Mr. Anastasiades said his government is committed to bringing this down to 2.4 percent by the end of next year.

“We are very much aware of the need to cut the deficit, but without ignoring the need for continuing growth,” Mr. Anastasiades said.

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In European nations stricken by the financial crisis, leaders have been forced to rethink a strategy that relies solely on austerity measures. There is little to show for this belt-tightening besides an irate citizenry.

In France, President Francoise Hollande, a Socialist who ran his campaign on an anti-austerity platform, defeated incumbent Nicolas Sarkozy, an austerity advocate, in elections in May.

Everything on the table

Mr. Anastasiades said that in terms of austerity measures, his government will “cut things that are seen as not necessary.”

“Everything will be on the table,” he added.

Cyprus last month became the fifth country to seek a bailout, joining Greece, Spain, Portugal and Ireland. Cyprus finds itself in the situation because its banking sector was exposed to debt-crippled Greece.

Austerity plus growth

The failure of an austerity-only approach has brought about a rethinking in Europe.

At a meeting in Brussels last week, Italian Prime Minister Mario Monti successfully nudged German Chancellor Angela Merkel to agree to a plan that would allow new bailout money to recapitalize struggling banks directly rather than channel the funds through governments. Mrs. Merkel, like Mr. Sarkozy, has been a strong advocate of austerity measures.

Under the agreement in Brussels, the 17 EU nations that use the euro currency can receive financial aid without first agreeing to tough austerity measures, provided they comply with the European Commission’s budgetary rules.

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