(MENAFN - AFP) Cyprus said Thursday it is close to agreeing a bailout with a troika of lenders after marathon talks on deep spending cuts and reforms to save the eurozone member's teetering economy.
President Demetris Christofias sought to allay fears that officials from the European Commission, European Central Bank and the International Monetary Fund would leave the island empty-handed after more than two weeks.
"After tough negotiations with the troika, and keeping in mind the difficult circumstances this country is going through, we are very close to signing the memorandum with the troika," Christofias said in a statement.
"With the issues that remain, which are very limited, there is a possibility that very soon we can bridge those differences."
The statement, the president's first on the matter since the latest round of talks began on November 9, appeared to dismiss criticism he was not ready to agree to harsh terms.
The troika is expected to wrap up the talks on Thursday over what is needed to secure an agreement for EU financial aid.
Reported sticking points are its proposal to privatise profit-making utilities, use natural gas revenues to help pay off public debt, cut pensions and to reform index-linked salary increases.
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 an EU bailout in June after its biggest lenders, Cyprus Popular Bank and Bank of Cyprus, could not meet new capital reserve limits because of exposure to Greece.
A document leaked to the media shows the government apparently proposing tax hikes and fewer cutbacks over a longer period than proposed by the troika.
No official bailout figure has been given, but it reportedly totals 17.5 billion euros (22.5 billion) -- 10 billion euros for the banks, 6.0 billion euros for maturing state debt and 1.5 billion euros for public finances.
Cyprus reportedly hopes to cut the debt gap by about 975 million euros by the end of 2016 rather than the 1.2 billion euros in mostly public finance cuts by 2015, as sought by the troika.
The troika's proposal is 80 percent through expenditure cuts and 20 percent from tax hikes.
It reportedly wants to slash the state payroll by 15 percent, shave 10 percent off welfare benefits, scrap an inflation-linked cost-of-living allowance and tax pension payments.
But the government has resisted that, saying it would undermine an economy already in recession.
Cyprus proposes a two percentage point hike in value-added tax to 19 percent by 2014, a five-cent rise in excise duty on petrol and 150 million euros slashed off state benefits.
It has been unable to borrow from international markets since last year when credit rating agencies lowered its sovereign rating to junk status.
Fitch downgraded on Wednesday debt issued by eurozone member Cyprus by two notches, from "BB" to "BB-" and said the outlook was negative, which means it could be cut further.
It warned a "delay in negotiating official support has contributed to the deteriorating economic conditions and raised uncertainties about public sector reform and the correction of macroeconomic imbalances".