Georgiades told a group of Lithuanian journalists in Nicosia that Cyprus could suffer a deeper contraction due to the banking system's restructuring demanded by the Eurogroup in return for a bailout.
"Yes, it could be double-digit. The estimate actually is a recession of just under nine percent, 8.7 percent (...) minus 8.7 is not too far from two-digit," he said, answering a question by BNS.
Under a 10-billion-euro bailout deal with the EU, the European Central Bank, and the International Monetary Fund, Cyprus will have to drastically trim down its oversized banking sector, raise taxes, scale back the public sector workforce, and privatize some state-owned companies.
Part of the money needed to secure the bailout will be raised by slapping a one-time levy of up to 60 percent on deposits of over 100,000 euro in the island's two biggest banks. This marks the first time that bank depositors have been taxed to rescue the banking system.
"What is still being debated, discussed in the rest of the eurozone and EU, in Cyprus, it was imposed and applied suddenly, swiftly, one single blow on our two biggest banks. One can only hope that EU partners at least acknowledge the challenges we are now facing," the Cypriot finance minister said.
Georgiades said that the government's priority now is to stabilize the banking system. The minister said that the authorities will continue to gradually relax the restrictions on banks, but he declined to give specific timeframe for this.
In an effort to ease the financial burden, Cyprus is also negotiating with Russia on restructuring a five-year 2.5-billion-euro loan it granted in 2011. Nicosia is asking Moscow to cut the interest rate and extend the repayment deadline.
Georgiades says that Cyprus is "delighted that initial reactions were positive," but added that they are still waiting for a decision from the Russian government and the State Duma.
The Cypriot finance minister told Lithuanian journalists that he believes in the future of the euro, but underlined the need for discipline.
"The wider the common currency zone is, the clearer and the stronger benefits are for everyone. But this does not mean that some clear common rules should not exist. That's where we were wrong. We were not disciplined enough," Georgiades said.
"Some were the first to break the rules but it is those who broke the rules last that are paying the penalty," he said.
Lithuania's economy slumped by more than 14 percent during the crisis in 2009 but returned to growth the following year. Lithuania's GDP is forecast to grow by 3.6 percent this year after expanding by 3.6 percent last year.
