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Cyprus' massive public sector absorbs almost a third of government spending and workers have grown accustomed to large paychecks and benefits such as automatic, twice-yearly pay rises calculated according to inflation. Trade unions and some politicians have already voiced opposition to measures that they say will hurt workers and push the economy further into recession. Cypriot Finance Minister Vassos Shiarly said the European and IMF creditors
-- collectively known as the troika -- are eyeing public sector cuts and tax hikes that "won't harm the economy." Shiarly told state-run Cyprus News Agency this week that cuts "won't come from the electricity of telephone bills, but will come from large state expenditures which are nothing else but salaries and benefits." He said the government doesn't agree with everything the troika is urging it to do and that more discussions are needed, without elaborating. Troika officials are due back to the island in September, Shiarly said, with a deal expected to be signed either in September or October. Standard & Poor's said if the government fully implements the conditions that come attached with a rescue deal, "it would likely be positive for Cyprus' creditworthiness as these would aim to reform public finances and reduce large economic imbalances."
[Associated
Press;
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