NICOSIA (Reuters) – Cyprus’s Parliament approved yesterday a state budget that would cut the deficit to 3.7 percent of gross domestic product (GDP) in 2004, the year the country is due to join the European Union. The budget sets net spending at 3.4 billion Cyprus pounds ($7.14 billion) on revenue of 2.8 billion. It was passed with a show of hands in the 56-member Parliament. Cyprus’s budgets have historically been in deficit, a feature which must change once the island joins the European Union. Nicosia aims to join the eurozone, which dictates a deficit of 3.0 percent of GDP and less, by January 2007. It is facing the prospect of busting its own forecasts of a fiscal deficit of 5.4 percent for 2003. Private economists and the central bank fear the indicator is likely to be closer to 6.0 percent or more. Sluggish growth of the tourism-reliant economy and wide-ranging tax reforms introduced in the summer of 2002 in preparation for EU membership have sapped government revenues, dramatically upping the fiscal shortfall to its highest level in a decade. Authorities say they will try to cut it incrementally by raising the retirement age of civil servants, outsourcing more, collecting tax more efficiently and increasing fees for government services. The budget covers the southern two-thirds of the island, controlled by the internationally recognized Greek-Cypriot government. A Turkish-Cypriot administration in the breakaway north is recognized only by Turkey. Reunification negotiations have been at a standstill for the past nine months, increasing the possibility of a divided island acceding to the European Union next May. The costs of reunification have been estimated at between 10 and 16.5 billion Cyprus pounds, roughly double the combined GDP of both sides.