Bailout lower than Greek Cyprus hopes

NICOSIA- Agence France-Presse

Greek Cyprus President Nicos Anastasiades gives statements to the media at the European Parliament. REUTERS photo

After nine months of stop-start negotiations, cash-strapped Greek Cyprus is on the verge of securing an EU bailout but analysts say it will come at a hefty price.

Eurozone finance ministers are to meet today after a two-day EU summit in Brussels, to thrash out a bailout plan for Greek Cyprus that will hopefully conclude marathon talks.

“A bailout package for Cyprus and its troubled financial sector will likely be closer to 10 billion euros ($13 billion) than the earlier floated 17 billion euros,” said Jeroen Dijsselbloem, the Netherlands’ finance minister and heads the Eurogroup, the regular meetings of finance ministers of the 17-country eurozone.

“That’s going considerably lower, in the direction of ten billion,” Dijsselbloem said on Dutch national broadcaster NOS on March 13.

Greek Cyprus is the fifth financial rescue following those for Greece, Ireland, Portugal, and for Spanish banks, but has proved to be the most difficult to conclude.

The Christofias government tried to avoid the harsh terms of an EU bailout by asking Russia and China for bilateral loans.

But as the amount required soared, it became clear that the troika - the European Commission, the European Central Bank and the International Monetary Fund - was the only institution with the resources to help.

The mooted 17-billion euro ($22.2 billion) bailout figure is roughly the same as the island’s total economic output, and would increase debt to more than 140 percent of gross domestic product (GDP), a level considered unmanageable in the long run.

The island’s Simerini newspaper said Greek Cyprus had been told to find 7 billion euros of the 17 billion euros it needs because lending the government more than 10 billion would make the debt unserviceable.

To help fast-track an agreement, Greek Cyprus has agreed to submit its banks to independent scrutiny to allay suspicions of money-laundering.

Following the eurozone summit, Finance Minister Michalis Sarris is to fly to Moscow for talks on March 18. On the agenda will be extending a 2.5 billion euro Russian loan payment due in 2016 and discussing how Russia could contribute to the bailout package, state radio reporte