* Cyprus flag carrier crimped by competition
* Government cannot prop up loss making firms - minister
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NICOSIA, Nov 9 (Reuters) - Cypriot flag carrier Cyprus Airways will likely post a full-year loss of around 30 million euros ($42 million), hit by cheaper rivals and fixed costs, finance minister Charilaos Stavrakis said.
"The viability of Cyprus Airways must worry us," Stavrakis told parliament on Tuesday, adding the forecast earlier this year had been for a loss of 2-3 million euros.
Majority state-owned Cyprus Airways posted a first-half loss of 25.1 million euros in August, hit by disruption from the volcanic ash cloud and Greece's financial crisis.
Cyprus Airways underwent a restructuring in 2006 and 2007, when it shed about a fifth of its workforce and staff took pay cuts. Part of that restructuring involved spinning off charter subsidiary Eurocypria and selling it to the government.
Three years on, Cyprus went to the European Commission last week suggesting the companies be merged. The plan was blocked and the European Union urged authorities to liquidate Eurocypria, which has since suspended operations.
"The clear decision by Brussels is that the government cannot continue to support loss making companies," Stavrakis said. (Reporting by Sarah Ktisti; Writing by Michele Kambas; Editing by Dan Lalor) ($1 = 0.7187 euro)