Dec. 15 (Bloomberg) -- A 12-hour strike by Cypriot air traffic controllers in protest over the government’s austerity measures is disrupting flights to and from Cyprus, Adamos Aspris, a spokesman for Larnaca and Paphos airports, said.
“A total of 79 flights to and from Cyprus scheduled for today are affected by the strike that started at 9 a.m.,” Aspris said in a telephone interview today. The number of canceled flights can’t be determined yet, he said.
Cypriots protest against austerity plan
Greek Cypriot civil servants held an unannounced 12-hour strike on Thursday to protest against an austerity budget that includes an unprecedented two-year pay freeze for public sector workers.
The strike shut down the Larnaca and Paphos international airports and also disrupted administrative preparations for local government elections due to take place on Sunday, according to a government official.
Cyprus faces the possibility of becoming the next eurozone member to seek an international bail-out, with a widening budget deficit and sizeable exposure of its two biggest banks to Greece.
After losing access to international capital markets last May, the government negotiated a €2.5bn emergency loan from Russia in order to cover debt servicing in 2011-2012.
Hopes of an economic recovery this year were dashed by a deadly explosion of munitions stored at a naval base that wrecked the island’s biggest power station, causing damage estimated at around €1bn.
The government has cut this year’s growth forecast from 2 per cent to 0.5 per cent of gross domestic product.
The International Monetary Fund said last month that Cyprus was entering recession, with zero growth projected this year and a contraction of one percentage point in 2012.
Hundreds of strikers shouting anti-austerity slogans gathered outside the parliament building in Nicosia, forcing lawmakers to postpone the budget vote until Friday. Three out of the four main Greek Cypriot parties have said they will back the austerity programme.
Kikis Kazamias, finance minister, said: “It is disappointing … I was waiting for formal approval of the budget before sending a message to Brussels that we’re implementing what we promised, and I wanted to highlight a political and labour consensus.”
The government has pledged to cut the budget deficit next year from 6.0 per cent to 2.8 per cent of gross domestic product, and achieve a balanced budget by 2014.
In addition to the salary freeze, Cyprus’s 50,000 public sector workers will have to pay higher pension contributions. Index-linked wage increases will be cut for higher-paid workers.
About €200m ($260m) of savings will come from reductions in social benefits, mainly affecting students and families with children. The value-added tax rate will be raised from 15 per cent to 17 per cent.
Moody’s Investors Service last month cut Cyprus’s credit rating by two notches to Baa3, the lowest investment grade, predicting that the government will have to bail out banks next year because of their large exposure to Greek debt.
The two largest Cypriot banks have only moderate holdings of Greek bonds but are significant lenders to the private sector through their branch networks in Greece.
The ratings agency also said Cyprus’s “weak capacity to implement budget and structural reforms needed to ensure the sustainability of government finances” contributed to the downgrade.
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