Northern Cyprus could go bankrupt unless Turkish Cypriots accept an austerity package that has sparked mass protests in the past few weeks, according to Turkey's Deputy Prime Minister Cemil Cicek.
Last month the Northern Cyprus imposed 40 percent salary cuts on its bloated civil service, and announced plans to sell off its telecoms and electricity providers and privatise a university.
Turkey contributes around $500 million a year to Northern Cyprus.
Cicek said the Northern Cyprus government was expected to show a deficit of 550-600 million lira ($314-376 million) and could run out of resources by the autumn. It needed to spend more wisely or it could follow its airline into bankruptcy.
"Northern Cyprus Turkish Airlines, which posted 40 million lira loss annually, has gone bankrupt," Cicek told Hurriyet.
"Northern Cyprus state could face the same risk if they do not abide by the protocols. Eighty-four percent of all resources are spent on public sector salaries, with not much left for other expenditures," he said.
Some 12,000 people work in Northern Cyprus's civil service but it is estimated that double that number are on the public payroll.
A collapse in its construction sector led to a fall of almost 10 percent in economic output in 2008 and 2009, but the economy is expected to have grown by one percent in 2010.
ReutersLast Mod: 13 Şubat 2011, 12:15