23rd Sep 2023

Cyprus bailout to dominate EU ministers' talks

  • Cyprus is seeking a bailout package worth up to €18 billion (Photo: jnocca93)

Eurozone finance ministers are meeting on Monday (4 March) amid expectations of swift movement on a bailout for Cyprus before the end of March.

The Mediterranean island elected centre-right politician Nicos Anastasiades in last week's presidential vote, increasing the prospect of a swift rescue deal.

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The new government was sworn in on Friday, with Michalis Sarris, the country's new finance minister, set for a grilling in Brussels on his attitude towards a privatisation programme.

The previous government, led by Communist Demetris Christofias, was opposed to privatisation - one of the demands made by international lenders for the bailout to go ahead.

Cyprus is expected to need between €15 billion and €18 billion to recapitalize its banks and to enable the government to meet its commitments.

The debt deal would see Cyprus' debt to GDP ratio rise to 140 percent, second only to Greece in the eurozone.

The EU is also anxious to see the results of an investigation by a private audit firm on the implementation of rules against money laundering, amid reports that the island's banks are a haven for dodgy Russian businessmen.

A senior EU official indicated there is "hope that the new government will be forthcoming," adding that "the troika [the European Commission, the European Central Bank and the International Monetary Fund] has been waiting for quite some time to find an interlocutor in Nicosia."

He said the three international lenders are "close to [finding] a conclusion in the second half of March".

Cyprus is predicted to run out of money in May unless it gets help.

But for his part, German finance minister Wolfgang Schaeuble told German newspaper Tagesspiegel over the weekend that ministers are prepared to take their time.

"We will decide without rushing. Cyprus's problem is not easy to solve," he said.

The Eurogroup meeting will also be the first ministerial gathering in the wake of dismal forecasts for the European economy.

Figures released by economic affairs commissioner Olli Rehn last month projected that the eurozone would remain in recession in 2013, with an expected contraction of 0.3 percent.

Rehn also said that a number of countries are expected to miss their deficit targets because of the downturn, meaning the commission will have to consider extensions of its deficit-cutting timetable.

Any decisions on the timetable are not expected before May, when the Spring economic forecast will be published, however.

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