The Cypriot government has made “good progress” with the so-called troika toward a bailout agreement the eastern Mediterranean island needs to refinance its banks and pay its bills.
Cyprus and the troika, comprising the European Commission, European Central Bank and International Monetary Fund, have “made good progress toward agreement on key policies to strengthen public finances, restore the health of the financial system and strengthen competitiveness, so as to pave the way for the economy to return to sustained growth and financial stability,” the troika said in a statement today.
Cyprus in late June became the fourth euro-area nation to request a financial rescue since a 2010 bailout of Greece. The rescue will encompass banks weakened by their exposure to the Greek economy as well as the public sector.
President Demetris Christofias said yesterday that the Cypriot government is “working very hard” to strike an aid agreement. Finance Minister Vassos Shiarly said Cyprus may need as much as 17.5 billion euros ($22.7 billion) of aid, almost the size of the country’s economy.
“Discussions are expected to continue from respective headquarters with a view to making further progress toward a potential program,” the troika said. “The preliminary results of a bank due-diligence exercise, expected in the next few weeks, will inform discussions between official lenders and Cyprus on financing solutions consistent with debt sustainability.”
European Union Economic and Monetary Affairs Commissioner Olli Rehn said the “decisive progress” in Cyprus’s bailout negotiations is “an important step toward full agreement.”