NICOSIA, Cyprus – Cyprus officials hopes to complete the financial aid talks with their counterparts from the EU over the next three weeks. Results of the talks will urge future creditors to be lenient with the country, after the experience with the rescue of Greece.
Last June 24, the Mediterranean country became the fifth country in the euro zone to request a bailout fund support from the European Union. The immediate financial problems of Cyprus come from the strong statement of its gigantic debt-laden banking sector in Greece. The Phileleftheros newspaper in Cyprus reported that the cost of rescue from banks would be €10EUR million Euros.
Technocrats of the European Commission, the European Central Bank and the International Monetary Fund or also known as the “troika”, began assessing the economy of Cyprus last Tuesday.
View with deep suspicion by the Cypriot public because of Greece’s painful experience, Cyprus officials said that the troika should be aware of local sensitivities in any of the recommendations they come up with.
“The problems in Cyprus are mainly focused on the banking sector and that is where particular emphasis should be given,” said Finance Minister Shiarly Vassos, who met with officials of the troika last Wednesday.
He declined to speculate about any amount of ransom and said no figures were discussed.
The figure of €10EUR million set by the newspaper is in line with initial estimates of the total cost of rescuing the economy of the island. Also present is problem with debt sustainability as the annual economic output of Cyprus is just 17.300 million euros of GDP. The Central Bank declined to comment and said that any figure in the press is “pure speculation”.
The two largest banks in Cyprus suffered significant losses because of cuts in the value of their holdings in Greek sovereign debt, assuming a stroke of €4EUR million.
The team of 30 economists in troika completed their fact-finding mission last Friday and will return sometime around July 16 with recommendations. According to Shairly, the goal was to finish negotiations this month.
Cyprus, which expelled from the international capital markets due to double-digit returns on debt during the past 14 months, refused to seek help from their EU partners since late last year. This prompted them to assume a bilateral loan of €2.5EUR million with Russia.