No Comparison With Greece Economy - Orphanides

Cyprus' economic situation cannot be compared to Greece because the island's 'budget finances are in better shape' and 'debt to GDP ratio is considerably smaller', said Central Bank governor Athanasios Orphanides.

However, the government should take appropriate steps to tackle 'the deterioration of the fiscal finances,' he said in an interview with Bloomberg. In 2009, both Cyprus and Greece exceeded the EU's budget deficit limit of 3 percent of GDP. Cyprus' debt stands at 6 percent of GDP and Greece's at 12.75 percent.

The steps must be taken "to avoid a further deterioration that would have adverse longer-term consequences" for Cyprus' economy, said Orphanides. The budget deficit estimate for 2009 puts Cyprus in the middle of the range for the euro area and the situation is clearly not as dire as in some other euro area countries, he said.

The government must curtail spending and control its budget more strictly, said Orphanides, adding that it is crystal clear that there is a need for corrective measures to avoid further deterioration. The growth prospects for the Cypriot economy in 2010 are somewhat lower than the growth prospects for the euro area as a whole, he said.

Meanwhile, EU economy and finance ministers are continuing discussions on Greece's economic situation. Also under discussion is the possibility of introducing a European bank tax in order to protect society from future crises.

"After the co-ordinated action of the European Union to keep the financial system afloat during the crisis, some Member States consider that the moment has arrived for large banks to assume their share of the liability for the costs incurred by society," said a spokesman.

The Ecofin Council meeting will examine the updated stability programme presented by the government of George Papandreu, which includes a commitment to reduce the public deficit to below 3 per cent by 2012, in line with the European Stability and Growth Pact.

The Greek government has also agreed to reduce its deficit this year by four percent of GDP, from 12.75% to 8.70%. In exchange, it has received the assurance of its Eurozone partners that it will not allow the Greek state to go bankrupt from lack of financing.