Cyprus awaits EU announcement on bailout deal

(NICOSIA) - Trade union leaders were briefed on Friday on terms the Cyprus government has agreed for a bailout by international lenders, as Nicosia awaits final confirmation from Brussels, officials said.

Cyprus government spokesman Stefanos Stefanou said union bosses were informed of the draft agreement ahead of an official announcement from the European Commission expected later on Friday.

"We are waiting on Brussels for an announcement related to the memorandum and briefings will continue once the procedures are finalised," Stefanou told reporters.

"That there are unpleasant and painful measures and provisions in this memorandum is a given. It is something that we as a government had warned of and declared from the beginning," he added.

After the meeting, influential civil servants union leader Glafcos Hadjipetrou voiced dissatisfaction with the deal. When asked about possible strike action he replied: "Certainly we are not going to say bravo because our salaries have been slaughtered."

On Thursday President Demetris Christofias said a deal was "very close" with the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund for a bailout the finance minister said would involve some 17 billion euros ($21.8 billion).

It appears a compromise deal was reached on the sticking points of index-linked salaries, privatising the telecommunications authority and managing revenues from a major natural gas find.

The money needed by Cyprus was widely reported to total 17.5 billion euros ($22.6 billion) -- 10 billion euros for the banks, 6 billion euros for maturing state debt and 1.5 billion euros for public finances.

An independent audit of the banks' requirements is still underway, so the final figure for aid to the banks has not yet been announced.

The country's entire GDP in 2011 was only 17.97 billion euros ($23.2 billion).

Mass-selling daily Phileleftheros said the government had agreed to total cuts of 1.1 billion euros from the troika's initial position of 1.2 billion.

It said that public sector salary cuts would range from 6.5 percent to 15.5 percent over the next three years while the retirement age will go up from 63 to 65 years of age and index-linked wages would be frozen during the recession.

According to figures submitted to parliament on Thursday alongside the 2013 budget, which will include some of the austerity measures agreed, the island's GDP is expected to shrink 2.4 percent this year to 17.85 billion euros.

It is then expected to contract by 3.5 percent in 2013 to 17.49 billion euros and by a further 1.3 percent in 2014.

The fiscal deficit is projected at 4.4 percent of GDP in 2013, down from 5.2 percent this year, while unemployment is expected to hit a record 13.8 percent in 2013 and 14.2 percent in 2014.

The talks, which started in July, are the longest the troika has been involved in before agreeing terms, mainly because Cyprus is uneasy with the level of cuts and reforms.

Nicosia applied for a bailout in June after its biggest lenders, Cyprus Popular Bank and Bank of Cyprus, failed to meet new capital reserve limits because of exposure to Greece.

Cyprus has been unable to borrow on international markets since last year when credit rating agencies lowered its sovereign rating to junk status.