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Cyprus plans tax breaks, casinos to kick start economy

A man walks past a branch of Bank of Cyprus in Nicosia March 31, 2013.


Cyprus plans to lift a ban on casinos and offer firms tax exemptions on profits reinvested on the island under a package of reforms to kick start its ailing economy, its president said on Monday.

Cyprus's euro zone partners agreed on a €10-billion ($13-billion U.S.) rescue package last Monday following weeks of tense negotiations, but its tough terms look set to deepen the island's recession, shrink the banking sector and cost thousands of jobs.

President Nicos Anastasiades, who briefed ministers on the economy during an informal meeting, said the 12-point growth plan would be put to the cabinet for approval within the next 15 days.

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The program includes measures to attract foreign investment to the island – a hub for offshore finance – as well as tax exemptions on business profits reinvested there, and the easing of payment terms and interest rates on loans.

With about €68-billion in its banks, Cyprus has a vastly outsized financial system that attracted deposits from abroad, especially Russia.

In a bid to attract more tourists to the south of the island, it also hopes to lift a ban on casinos, which so far only operate legally on Turkish-controlled northern Cyprus.

Speaking to reporters after a memorial service to commemorate the 1955 armed campaign against British rule, Anastasiades said the government would focus on "growth and incentives for growth."

Cyprus's bailout is the first to impose steep losses on depositors, and is expected to hit business activity especially hard.

Major depositors in Cyprus's biggest lender, Bank of Cyprus, will lose around 60 per cent of savings above €100,000. Banks reopened on Thursday after a nearly two-week hiatus to avert a bank run, but the ripple effect of their closure is likely to strangle business on the island for a long time to come.

Anastadiades has defended the rescue deal as painful but essential, saying that without it, Cyprus had faced certain banking collapse and risked becoming the first country to be pushed out of the European single currency.

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