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Cyprus unveils workfare measures to ease bailout shock

Cypriot President Nicos Anastasiadis speaks to businessmen on April 19, 2013 at the Presidential Palace in Nicosia. Anastasiades unveiled a package of measures on Friday aimed at keeping Cypriots in employment as the massive costs of a eurozone bailout deliver a huge blow to the island's economy.

Cyprus President Nicos Anastasiades unveiled a package of measures on Friday aimed at keeping Cypriots in employment as the massive costs of a eurozone bailout deliver a huge blow to the island's economy.

The conservative president said those who do not actively seek work will not qualify for state benefits but that his government would seek to cushion the blow for those who do on an island where the jobless rate has traditionally been low.

He said he would also review longstanding political taboos on the island in a drive to boost the economy, including the possibility of legalising casinos, anathema to the island's powerful Orthodox Church.

With mounting pressure for Cypriots to be given priority in the work place, which would risk breaking EU rules, Anastasiades was careful to say job-creation schemes would be open to all "legal and permanent residents of Cyprus over the past five years."

But he stressed that the island would also stop being a "migrants' paradise" and that benefits to asylum seekers would be "significantly reduced," with cash payments for food and clothing replaced by a coupon system.

He said state benefits would also be withdrawn from those who do not actively look for work.

Anastasiades said the state would rehire 800 contract workers while investing 21 million euros to subsidise salaries by 40 percent for 6,000 registered jobless who would be given work in the key tourism industry.

Companies will also be given 25 percent in tax breaks for every new person they hire in the next year while the unemployed who work from home will have their salaries subsidised by 65 percent.

Anastasiades said he will also explore the possibility of legalising a small number of large casinos in government-held areas of the Mediterranean holiday island, on which Turkish Cypriots in the breakaway north have long profited from gambling.

The president said he understood the huge sacrifices that Cypriots were being called on to make in return for an emergency loan of 10 billion euros ($13.1 billion) from international creditors but called on everyone to accept that there was no choice but for the island to come up with the rest of the 13 billion euro costs.

"Undoubtedly there are more difficult tests ahead which is why I urge patience and understanding from everyone," he said in a televised address.

"I want to stress that in order to succeed in restarting the economy and exiting the crisis as soon as possible, can only be achieved by sticking to the obligations we have undertaken in the loan agreement."

His comments come as the bailout deal remains in the political balance after the island's top law official ruled it must be ratified by a deeply critical parliament.

Just one MP has openly declared that he will vote down the agreement, which has already undergone ratification by other EU parliaments, but the opposition communist and socialist parties have declared strong reservations about the terms.

Cyprus has been forced to agree to drastically reduce the size of its once lucrative banking sector, raise taxes, cut its public sector workforce and privatise state-owned utilities.

That has put an extra burden on an economy already in recession and expected to shrink further.

Unemployment stands at around 15 percent and is expected to grow sharply this year and next.

A eurozone Cyprus assessment is forecasting gross domestic product to plunge by 8.7 percent in 2013, led by a whopping 13.9 percent drop in domestic demand, and to fall another 3.9 percent next year.