CYPRUS’S GOVERNMENT and opposition parties agreed a package of budget austerity yesterday and more is in store after a massive munitions blast destroyed the island’s largest power station.

Already under pressure from its exposure to debt-riddled Greece and high borrowing costs on international markets, party leaders said they had agreed on an initial package, though details were scant. “The dialogue will continue for the adoption of additional measures, with a priority for measures short-term in nature,” government spokesman Stefanos Stefanou said.

Party officials at a meeting between President Demetris Christofias and party leaders said it included privatising the island’s stock exchange.

Mr Stefanou said the package was on the basis of proposals unveiled on July 1st – that included provisions for the dismantling of three semi-government corporations and adjustments to pension contributions of civil servants – and subsequent proposals made by political parties.

Party officials said the budgetary cost of the measures was difficult to quantify. Facing rising borrowing costs on international markets because of pressure on euro zone periphery debt and exposure of its banks to Greece, Cyprus was facing economic woes before the July 11th blast made them worse.

Economists say Cyprus could face a bill of at least €1 billion from damage to the plant and widespread disruption of business from rolling power cuts.

Cyprus’s GDP is worth €17.4 billion, and its annual budgeted spending is about €8 billion.

It was unclear whether the measures factored in the economic impact from the blast, which finance ministry sources say has wiped out Cyprus’s growth projections.

Preliminary estimates suggest Cyprus will register zero growth this year, from a previous 1.5 per cent forecast. – (Reuters)