November 14, 2024

Euro Zone Strives for Breakthrough in Bailout Package for Cyprus

BRUSSELS — Cyprus reached a long-awaited bailout agreement early Saturday that puts some of the burden for shoring up the island’s beleaguered economy on its bank depositors.

The most contentious issue in months of negotiations was whether to force Cypriot depositors to take losses in order to make the country’s debt more manageable. The Cypriot authorities had sought to head off any such initiatives on the grounds that they would do lasting damage to their financial services sector.

In the early hours of Saturday morning, after 10 hours of talks, finance ministers from euro area countries, the International Monetary Fund and the European Central Bank agreed on terms that include a one-time tax of 9.9 percent on Cypriot bank deposits of more than 100,000 euros, according to a person with direct knowledge of the talks who asked not to be identified while ministers still were hammering out details in private.

Jeroen Dijsselbloem, the president of the group of ministers, told a late night news conference that lenders had reached “a political agreement” to aid Cyprus. The challenges to reaching a deal were “of an exceptional nature,” he said.

Going into the meeting, finance ministers sought to limit the overall costs of the rescue plan while Christine Lagarde, the president of the I.M.F., pushed for a deal that is generous enough to enable Cyprus eventually to pay the money back.

The Cypriot authorities wanted a plan that ensures that the island remains attractive to investors, who include many Russians with large deposits in the country’s banks.

Ms. Lagarde was blunt about the need for ministers to agree to a realistic package of measures. “All I know is that we don’t want a Band-Aid,” she said. “We want something that lasts, something that is durable and that will be sustainable.”

The key to a breakthrough was finding a way to bring down the bailout package, estimated at 17 billion euros ($22.2 billion). That amount is small compared with the rescue deal for Greece, but represents almost as much as Cyprus’s gross domestic product, which is about 18 billion euros.

The deal that emerged on Saturday morning was for a bailout of up to 10 billion euros, Mr. Dijsselbloem said.

Cyprus asked for the bailout in June last year. But talks faltered when the former president Demetris Christofias, a Communist, balked at measures like privatizations. The talks sped up after the election last month of Nicos Anastasiades of the Democratic Rally, a center-right party, to the presidency.

The other elements of a deal were expected to involve Cyprus raising its low corporate tax rate, privatizing state assets and overhauling its banks to ensure that they are not havens for money laundering.

Russia also was expected to contribute to the arrangement, perhaps by agreeing to lower the interest rate on a loan worth 2.5 billion euros it has already made to Cyprus.

Mujtaba Rahman, a senior analyst with the Eurasia Group, a political risk research and consulting firm, said it was likely that countries like Germany and Finland would ultimately reach a deal with the I.M.F.

“The fact is that some governments in the north of Europe need the I.M.F. also to be contributing money to Cyprus in order to convince their parliaments to give approval to a deal,” Mr. Rahman said.

This article has been revised to reflect the following correction:

Correction: March 15, 2013

Because of an editing error, a headline on an earlier version of this article misspelled the name of the country in talks to receive a bailout. It is Cyprus, not Cypress.

Article source: http://www.nytimes.com/2013/03/16/business/global/showdown-looms-over-cyprus-bailout-deal.html?partner=rss&emc=rss

Cuomo Secures Big Givebacks in Union Deal

The five-year agreement between Gov. Andrew M. Cuomo, a Democrat, and the Civil Service Employees Association, includes a three-year wage freeze, the first furloughs ever for state workers and an increase in the amount employees must pay toward their health insurance.

Savings would amount to $73 million this year, and as much as $1.6 billion over five years, if other labor unions representing public workers agreed to similar concessions. Absent those agreements, there could still be layoffs of some public workers, the Cuomo administration said.

The agreement was announced as the governor and lawmakers negotiated over a number of issues in the waning hours of the legislative session. Senate Republicans had not decided on Wednesday night whether to allow a vote on the most contentious issue, the proposed legalization of same-sex marriage.

The negotiations between Mr. Cuomo and the union, which represents about a third of the 186,000 state workers, were largely free of the public rancor that accompanied efforts to reduce spending on labor in New Jersey and Wisconsin.

“I want to applaud C.S.E.A. for understanding, truly, the situation that the state is in,” the governor told reporters on Wednesday night. “The union really stepped up and helped the state out at a very precarious time, from a financial point of view.”

In a statement, Danny Donohue, the president of the union, said, “These are not ordinary times, and C.S.E.A. and the Cuomo administration have worked very hard at the bargaining table to produce an agreement that balances shared sacrifice with fairness and respect.”

The deal is subject to ratification by union members, who will vote by mail over the next several weeks. It would provide pay raises of 2 percent in the fourth and fifth years of the contract.

Mr. Cuomo, facing shrinking resources because of the recession, had earlier in the legislative session won approval of a state budget that depended on a $450 million cut in labor costs, either from layoffs or union concessions.

He had also proposed reducing pension benefits for new government workers; that proposal is unlikely to be approved in this session, but will be a potential flash point going forward.

Edmund J. McMahon, director of the Empire Center for New York State Policy, a research group that favors reduced government spending, called the deal a mixed bag.

On one hand, Mr. McMahon said, the agreement was not an effort at significant transformation, like that tried by Gov. Scott Walker of Wisconsin, who sought to end collective bargaining for many public-employee unions. On the other hand, he said, the New York deal marked a sharp departure from the state’s previous four-year labor contract, which put in place base wage increases of 3 percent a year for the first three years and 4 percent in the fourth year.

“In Wisconsin, they tried to change the rules,” Mr. McMahon said, adding, “If you’re negotiating within the rules of the game, this is probably the best deal you can get.”

Under the terms of the deal announced on Wednesday, lower-paid employees — those whose salaries start at about $33,000 or less — will have their share of health care premiums rise to 12 percent, from 10 percent, for individuals. More highly paid employees will have their share rise to 16 percent. The cost of family health coverage will also increase; for more highly paid employees, for example, the share will rise to 31 percent, from 25 percent. State officials expect that, as in the past, the health care changes will also apply to retirees, a potentially critical part of the overall savings.

In addition to taking a five-day furlough in the current fiscal year, employees must take a four-day leave in the year after, though the second-year furlough will be repaid at the end of the contract term.

Employees who remain through 2013 will earn one-time bonus payments of $775 in 2013 and $225 in 2014 — such one-time payments do not compound over time like salary increases, which increase long-term cash costs for the state and the burden on the pension system.

In addition to the wage and benefits concessions, the union also agreed to an overhaul of the disciplinary procedures for state employees accused of abuse or neglect of the developmentally disabled. The state and the union will develop a series of punishments for employees who commit disciplinary offenses in an effort to end the seemingly random punishments handed out by arbitrators to employees in the past. And there will also be an overhaul of the current arbitration panel and higher pay in an effort to recruit better arbitrators.

The Cuomo administration had pressed for the changes after a series of articles in The New York Times examining the treatment of the disabled in group homes and state-run institutions. Among the newspaper’s findings: The state has retained workers who committed physical or sexual abuse, rehired many workers it had fired, shunned whistle-blowers and rarely reported allegations of abuse to law enforcement officials.

While employees represented by the Civil Service Employees Association averted layoffs, the Cuomo administration is still negotiating with a number of other unions, including the Public Employees Federation, which represents 56,000 employees and is the second-largest union of state employees. The state has put forward a July 15 deadline for layoffs in other unions if an agreement is not reached to reduce their wages and benefits.

The Public Employees Federation has had more contentious talks thus far with the Cuomo administration, going so far as to post the administration’s negotiating position on the Internet, but its position was weakened by the agreement announced on Wednesday.

Ken Brynien, president of the Public Employees Federation, issued only a brief statement, saying his union “stands ready to meet with the state’s negotiators to reach an agreement.”

Article source: http://feeds.nytimes.com/click.phdo?i=303e5dfa35e832979db5ab091babdfd6