Cyprus' newly appointed finance minister said the country does not need a bailout now but stressed that only hard work would prevent it from seeking one in the future, the Athens News Agency (ANA) reported Friday.
Former communications minister Kikis Kazamias was appointed in a cabinet reshuffle Friday in a bid by President Dimitris Christofias to pass badly needed economic reforms to avoid bankruptcy, DPA reported.
Kazamias - who has served on the European Court of Auditors - faces the tough task of reining in public spending amid growing concern by the European Central Bank that Cyprus could become the fourth eurozone country to seek a bailout unless urgent action is taken.
Greece, Ireland and Portugal have all sought multi-billion euro bailouts from the European Union and International Monetary Fund since last year and now markets have targeted Italy and Spain, the bloc's third and fourth biggest economies.
Borrowing costs rose last week when credit rating agencies Moody's and Standard and Poor's downgraded Cypriot sovereign debt over concerns about the banking system's exposure to Greece and the economic repercussions of an explosion at a munitions depot which knocked out the island's main power station.
"There is no issue of seeking an international bailout at the moment," said Kazamias, adding "it is time for hard work."
In Brussels, EU Economy Commissioner Olli Rehn, told reporters that "while government debt in Cyprus is below average - it's about 60 per cent of gross domestic product - Cyprus still needs to take upfront expenditure-based consolidation measures ... Cyprus should stick to its target of correcting the budgetary deficit by 2012."
"In parallel, Cyprus should accelerate the structural reforms included in the country's national reform programme. That would boost the country's potential growth and competitiveness. For instance, reforming the pension and health care systems and the weight indexation system are of utmost importance."
The communist AKEL party was seen to have handled the crisis over last month's explosion badly and public support deteriorated.
One party, the DIKO, withdrew from the governing coalition over differences on economic reforms and ongoing talks on reunifying the divided island.
With only 19 deputies in the 56-member parliament, AKEL faces difficulties getting legislation through the house.
Reports said the withdrawal of DIKO also leaves Christofias at a disadvantage in UN-led reunification talks, where he will need the support of his political allies.
DIKO and another coalition party, the socialist EDEK, have long been at odds with Christofias over this handling of peace talks. They have urged him to withdraw proposals for the Greek and Turkish communities to share governance through a rotating presidency.
Cyprus has been divided into a Greek Cypriot south and Turkish Cypriot north since 1974, when Turkey invaded in response to a Greek-led coup. Only the Greek Cypriot south is internationally recognised and a member of the European Union.
With Cyprus due to assume the rotating EU presidency in the second half of 2012, UN Secretary General Ban Ki-moon has urged both communities to reach an agreement by October.
Christofias also appointed Erato Kozakou as foreign minister and Demetris Eliades as defence minister. dpa cp amh im Author: Christine Pirovolakis, Alexandra Mayer-Hohdahl