ECONOMY

In Brief

Cyprus may up taxes to fill financing gap NICOSIA (Reuters) – A fiscal consolidation package to plug Cyprus’s financing gap could include increases in taxation for Cypriot companies and banks, Finance Minister Charilaos Stavrakis said yesterday. Stavrakis said the government was in talks with coalition partners to raise revenues next year and meet an EU commitment that the island’s public deficit not exceed 4.5 percent. The island’s 2011 budget, presented this week, envisages a 5.4 percent deficit, creating a cash shortage in meeting the 4.5 percent target of 150 million euros. «An intensive dialogue has started with coalition parties to conclude a package which will cover this [cash] target,» Stavrakis told reporters. In addition to possibly raising corporate tax and taxing banks, Stavrakis said authorities were considering a new tax calculation system for large landowners. «The probable measures include a possible increase in tax on Cypriot companies, some form of taxation on banks, a review of tariffs on real estate… [and] possible taxes on tobacco and alcohol,» he said. Stavrakis’s center-left government failed to muster support earlier this year for a fiscal package that included a one-percentage point increase in corporate tax to 11 percent. That legislation was thrown out of parliament with the aid of votes from Cyprus’s junior coalition partner in government. Though broadly similar to the measures Stavrakis floated yesterday, the previous draft did not differentiate between local companies and the thousands of offshore companies on the island, and did not include taxes on banks, tobacco or alcohol. Spain meets bond sale target; yield drops Spain sold 4 billion euros ($5.2 billion) of 10- and 30-year bonds, the maximum target for the auction, and borrowing costs declined after the government implemented measures to shrink the euro region’s third-largest budget gap. The government auctioned off 2.72 billion euros in bonds due in 2020 at an average yield of 4.144 percent, compared with 4.864 percent at a sale on June 17, the treasury said yesterday. It sold 1.28 billion euros of 30-year debt to yield 5.077 percent, compared with 5.908 percent previously. Demand for the 10-year bond was 2.32 times the amount sold and the bid-to-cover ratio for the 30-year paper was 2:1. Greece’s near default this year led to a surge in borrowing costs in other European Union countries such as Spain and pushed yields on Spanish bonds relative to benchmark German debt to a euro-era record in June. The yield spread narrowed after the government cut public wages and increased sales tax as the economy struggled to shake off the deepest recession in six decades. «It’s a pretty good result,» said Sean Maloney, a fixed income strategist at Nomura International Plc in London. «The funding burden going forward is fairly light to the end of the year, so we might be entering a period of more stability.» Spain doesn’t face a bond redemption until 15.5 billion of debt matures in April of next year. (Bloomberg) Ship demand Greek shipowners, who have the world’s second-largest merchant fleet after China, bought 24 new ships last month, while their purchases of used vessels fell to seven, shipbroker Golden Destiny said. The $1.33 billion spent on new ships compared with the $187 million spent on secondhand ones; in July, Greek owners spent $553 million on 15 used vessels, the Piraeus-based broker said yesterday in an e-mailed report. «Greek owners have slowed their secondhand transactions, as they feel that the attractive new building prices offer better investment opportunities,» Golden Destiny said, adding that the prices of secondhand vessels hadn’t dropped in line with the cost of hiring ships, especially bulk carriers. The shipping business expects strong winter demand for bulk carriers, Golden Destiny said, citing firm Chinese demand for iron ore and the need for ships to sail further to load wheat cargoes in countries such as Australia, Argentina and the US after Russia halted exports. Oslo-based Arctic Securities yesterday raised its estimates of fourth-quarter rental rates for dry-bulk ships. (Bloomberg)