September 13, 2012 / 10:17 AM / 5 years ago

Troika seeks payroll, pension cuts for Cyprus: media

NICOSIA (Reuters) - International lenders discussing a bailout for Cyprus want salary and pension cuts, media reports said on Wednesday, as authorities said they would not take decisions detrimental to the broad population.

In a draft document reported by news portal In Business, lenders said they wanted a 15 percent cut in the state payroll by the end of 2013, a 10 percent cut in benefits, and the abolition of inflation-linked wage indexation in the public sector.

Cyprus, one of the smallest nations in the euro zone, sought a bailout from its EU partners and the IMF in June after its banks reported massive losses from their exposure to debt-crippled Greece and sought state aid.

The troika, a collective of the IMF, the ECB and the European Commission, presented the draft proposals at the end of their second mission in July. A new round of consultations is expected to take place later in September or October.

Proposals for salary cuts in Cyprus's public sector, and suggestions to increase their contributions towards pensions - they now pay less than those in the private sector - may prove difficult to digest for Cyprus's left-wing government, which faces a general election in Tax by one percentage point to 18 percent, according to In Business.

Cypriot President Demetris Christofias on Wednesday blamed the "greed and mistakes of bankers and mistakes in supervision" for its present predicament.

Cyprus's two largest banks are heavily exposed to Greece, having launched aggressive expansion plans there in the past 15 years to offset a saturated market domestically.

Christofias, who has also sought a 5 billion euro loan from close business and political ally Russia, said the country faced difficult decisions.

"But we want to take these decisions in a manner which does not unfairly burden workers and ordinary people who are in no way to blame for this situation," he said at an event on Wednesday.

Earlier, Russia's Finance Minister Anton Siluanov said an agreement was unlikely any time soon on a loan to Cyprus, leaving the island no viable immediate alternative to a troika bailout.

Reporting By Michele Kambas; editing by Ron Askew

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