Cyprus’s unemployment increased at a faster pace than anticipated under its bailout program and constitutes a serious challenge for the future, the European Commission said in a report on Wednesday.
The jobless rate will increase to 19.5 percent in 2014 from 17 percent this year, the European Union’s Brussels-based executive arm said in its assessment of Cyprus’s compliance with the terms of its aid plan. That compares with an April forecast for unemployment to rise to 16.9 percent next year from 15.5 percent in 2013.
Cyprus, the third-smallest economy in the 17-nation euro area, got approval for a 1.5 billion-euro payout by euro-region finance ministers on Sept. 13. It was the second disbursement under a 10 billion-euro rescue program following the country’s financial meltdown mainly as a result of banking losses on Greek government bonds.
Cyprus’s President Nicos Anastasiades said in an interview in Nicosia on Tuesday that his government’s goal is to “tackle the serious problem of unemployment” and create conditions for growth.
The commission said in its report on Wednesday that Cyprus’s economic adjustment program remains on track, while there are substantial risks as the country’s economic outlook remains uncertain. Gross domestic product is forecast to contract 8.7 percent this year and 3.9 percent in 2014, before growth returns in 2015.