Cyprus rejects bailout from world leaders

Cyprus will not accept a bailout from international lenders on the current terms being offered, President Demetris Christofias said on Wednesday, with the indebted government set to propose alternative savings.

Setting the tone for tough negotiations with lenders, Christofias said he would never sign a bailout deal which called for the sell-off of profitable state-owned enterprises, or which would abolish inflation-linked salary increments, Financialmirror.com reported.

It was the first time Christofias explicitly ruled out lending proposals as they presently stand, though officials have frequently said they considered the proposals non-binding and "building blocks" towards a deal.

A draft economic adjustment program prepared by the European Commission, the ECB and the IMF and submitted to Cyprus in July called, among other things, for ending wage indexation, known as CoLA, and embarking on a privatisation program.

"We aren't just saying 'no' to them," Christofias told Greek state broadcaster NET in an interview. "We are giving them counterproposals. They are being prepared, we are in the very final stages and which will provide for as much in savings as they (the troika) wants," he said.

Cyprus sought aid in June after its two largest banks suffered huge losses on their exposure to Greece, forcing them to turn to the government for aid.

The island, shut out of capital markets for 15 months and wrestling with its own fiscal imbalances and its first recession in almost 40 years, applied for a comprehensive bailout.