A third of the issues in the economy chapter of the Cyprus problem have been agreed, Sigma TV’s sources said on Friday.
The same sources have said that the property issue and compensation for lost properties will be one of the main pillars setting out the sustainability of the economics of a Cyprus solution.
The cost of compensation, Sigma’s sources have said, will be set out by the territorial readjustments, which are being discussed in Mont Pelerin. The same sources added that the cost will be approximately €25 billion.
Sigma has learned that both sides have agreed on the economy chapter:
- Monetary policy and financial supervision be exercised on the base of the European Central Bank’s instructions
- The euro will be adopted on the first day of a solution
- There will be three budgets (federal and that of the constituent states)
- Direct taxes will be an income of the constituent states
- Indirect taxes will be an income of the federal government
- The constituent states will have the right to make international agreements in the sectors of trade, tourism, and investments
Sigma’s sources have said that the estimation is that the federal budget will be in surplus.
Sigma has learned that the main source of income for the federal government will be through indirect taxes, which include VAT and consumption taxes.
The same sources added that after the functioning costs of the government are covered, than the leftover, which is estimated at €4.6 billion will be given to the constituent states.
Sources said that the income of the federal state will be given as follows:
- The net federal income will be €4.6 billion
- 94% of the net income (€4.4 billion) will be given to the constituent states on the basis of the per capita GDP
- The 6% that is left over (€233 million) will be given for a certain time to the Turkish Cypriot constituent state for development. This time period, the same sources said, will last until the living standard of the Turkish Cypriots reaches 85% of the living standard of the Greek Cypriots.
Sigma’s sources added that debt has also been agreed, with the plan outlining that each constituent state will be responsible for its own debt, while the federal government will be the guarantor of each state.
Sources said that the Turkish Cypriot side has said it is committed to not having debt in the case of a solution. Sources added however that if the federal state is to be the guarantor of debt for the constituent states, than there needs to be a mechanism, which will regulate its funds.
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