The Cypriot government on Wednesday approved an austerity package plan to shore up the island’s flagging economy and ward off bailout by the European Union.
The package provides for additional income and public spending cuts amounting up to 600 million euros (846 million U.S.dollars) by the end of next year.
The plan was introduced into parliament by the new Finance Minister Kikis Kazamias, who said that it aims at keeping public deficit down to 4-4.5 percent by the end of this year and down to 2-2.5 percent at the end of 2012, with an aim to wipe out public deficit entirely by the end of 2013.
The announcement of the package came as Fitch agency announced the downgrading of Cyprus’ credit rating by two notches to BBB, citing possible inability by the island to access international financing sources to re-finance its growing debt and consequent need for a bailout support.
The other two main rating agencies, Standard & Poor’s and Moody’s, had both cut Cyprus’s ratings last month down to BBB+ and Baa1 respectively.