Monday

2nd Oct 2023

Ministers look to March for Cyprus bailout

The terms of a €17 billion bailout for Cyprus and direct recapitalisation of European banks top the agenda of finance ministers in Brussels on Monday (11 February).

The meeting of the 17-member Eurogroup will be the first under the chairmanship of Dutch finance minister Jeroen Djisselbloem, confirmed last month to replace Luxembourg's Jean-Claude Juncker, who had held the role since the creation of the club in 2005.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Ministers are also expected to look at the prospect of the European Stability Mechanism (ESM) offering direct support to ailing banks.

Negotiations on a €17.5 billion rescue package for Cyprus began in November, with the Cypriot banking sector alone expected to need around €10 billion to stay afloat.

The talks have been complicated by the country's relationship with Russia, however.

On the one hand, Russia is helping, with Moscow expected to delay the maturity of last year's €2.5 billion loan to the island country.

But on the other hand, there are concerns about Cyprus' status as a haven for wealthy Russians, some of whom are said to use its banks to launder money.

With a new government set to take office in Cyprus in early March, following presidential elections on 17 February, EU officials are playing down the prospect of a swift agreement.

Polls indicate that the centre-right opposition leader Nicos Anastasiades, with 10-to-15 percent lead over his nearest rival, is to become the country's next President.

The incumbent, Demetris Christofias, a communist who opposes privatisation of Cypriot state-owned firms, is not seeking re-election.

One EU contact said that a decision on the bailout will most likely be reached at the end of March.

The official pointed out that the so-called troika - composed of officials from the European Central Bank (ECB), the International Monetary Fund and the European Commission - is not planning to meet with Cypriot ministers for the time being.

There is "not going to be a deal any time soon," the EU source said.

Another EU official told this website there are "differing signals on the scale of implementation" of anti-money laundering laws in Cyprus.

The senior source said the EU is keen for an independent auditing company to check if Cyprus is living up to its commitments.

But for his part, Joerg Rasmussen, the German member of the ECB's executive board, pointed to the risks of letting Cyprus fail.

"There must be no doubt about this: if Cyprus gets no external help, it will slide into default … [putting] at risk progress made last year on the euro crisis - and that would have high financial and political costs," he said in German daily Handelsblatt on Monday.

The other point on the Eurogroup agenda - bank recapitalization - is also proving to be thorny.

Talks are expected to focus on burden sharing - who will foot the bill for bank losses which emerge after it comes under the supervision of the ECB and appears on the balance sheet of the EU's bailout fund, the European Stability Mechanism (ESM).

Under the ESM treaty agreed by EU leaders in 2011, the bailout fund has access to €500 billion.

The bulk of the ESM's money has been earmarked for helping EU governments who can no longer borrow money on open markets, with just €100 billion set aside for direct help to banks.

Germany and ECB clash over Cyprus

The European Central Bank is at odds with Germany's finance minister over the consequences of not bailing out Cyprus and its wider implications for the eurozone.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. European Political Community and key media vote This WEEK
  2. Is the ECB sabotaging Europe's Green Deal?
  3. The realists vs idealists Brussels battle on Ukraine's EU accession
  4. EU women promised new dawn under anti-violence pact
  5. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  6. Punish Belarus too for aiding Putin's Ukraine war
  7. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  8. EU states to agree on asylum crisis bill, say EU officials

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us