The junior Turkish Cypriot coalition partner National Unity Party (UBP) took the decision to pull out of the partnership with the Republican Turkish Party (CTP) over the dispute about the economic protocol to be signed with Turkey.
CTP objects to certain elements in the 2016-2018 economic protocol, which calls for the privatization of ports and utilities and reform of the judiciary.
Due to the failure to sign the protocol, Turkey has not yet transferred funds to the Turkish Cypriots this year.
Because of inadequate funds, the administration could only pay 60% of the civil servant salaries that are above Euros 1,246 this month.
After a party assembly today, UBP announced that it was unacceptable for the administration not to be able to reach an agreement with Turkey over the economic protocol and therefore, not to be able to pay salaries. UBP is expected to formally pull out on Monday.
An early election could be on the cards for Turkish Cypriots if a new coalition formula is not found.