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IMF says Cyprus will need more spending cuts

By WTOP Staff

MENELAOS HADJICOSTIS
Associated Press

NICOSIA, Cyprus (AP) — Cyprus’ president on Wednesday rebuffed an International Monetary Fund assessment that Cyprus will need to make additional spending cuts to meet a key target of its financial rescue program.

IMF official Delia Velculescu said that more permanent cuts to government spending, including the public sector wage bill, are needed for authorities to achieve a primary surplus of four percent of gross domestic product by 2018. A primary surplus does not count the cost of servicing existing debt.

But President Nicos Anastasiades said that Cyprus would be under no obligation to follow any assessment by its international creditors as long as it remains steadfast to the terms of its 10 billion-euro ($13.4 billion) bailout.

“I want to assure you that with the progress we’ve made so far, I believe that we’ll be in a position to resist and to avoid whichever recommendations that may point to further cuts,” Anastasiades said.

Anastasiades also said that Cypriot authorities “emphatically” turned down the IMF’s recommendation for more cuts during bailout talks.

The surplus is seen as key to rolling back Cyprus’ public debt which is now around 120 percent of GDP. According to the program terms, public debt must fall to around 100 percent of GDP by 2020.

With Cyprus on the verge of bankruptcy, a joint IMF-European Union rescue package agreed in March 2013 forced uninsured deposits in the country’s two largest banks to be seized in order to recapitalize the bigger Bank of Cyprus. The smaller lender, Laiki, was shut down and parts of it absorbed by Bank of Cyprus.

Velculescu said Cypriot authorities made “impressive progress” in tackling the country’s economic woes with measures including a package of spending cuts backed up by revenues that amounted to around 7 percent of GDP. However, the IMF said in a staff report that more savings could be made by eliminating automatic pay rises for government workers before a wage freeze expires in 2016, better linking pay with performance and reforming the education sector and pensions.

Velculescu said the country must revise its foreclosure legislation to tackle the high number of bad loans — over half of all loans — that are holding back economic growth.

She said the IMF expects the Cabinet-approved legislation to pass since it’s a condition of the rescue program. But some political parties have openly opposed it over fears that people who lost jobs or saw their income dwindle in the wake of the bailout will lose their homes.

Anastasiades moved to ease those fears putting the legislation’s approval into question by outlining several steps in a nationally televised address Wednesday. One step allows borrowers to seek court protection. Another envisions the government buying the homes of low-income or jobless people who can’t make loan payments and letting them live there as renters until they’re able to buy it back.

Velculescu said in case the parliament votes down the legislation before a September 1st deadline, international creditors would have to return to the country to discuss with authorities how to proceed.

The next batch of rescue money — 350 million euros ($470 million) from the EU and 86 million euros ($115.5 million) from the IMF — is set to be released in late September.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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