- Cypriot government taps less than 10 billion-euro maximum
- Program exit leaves Greece as only euro nation in a bailout
The Cypriot government won the blessing of its European partners and the International Monetary Fund to exit a three-year-old aid program with no safety net, leaving Greece as the only euro-area country still in a rescue.
Cyprus leaves its 10 billion-euro ($11 billion) bailout after tapping just 7.3 billion euros of the total, returning to economic growth and regaining access to bond markets. The government of President Nicos Anastasiades opted against seeking a post-program precautionary credit line -- a step that would have involved further creditor conditions.
In a statement after a meeting on Monday in Brussels, euro-area finance ministers endorsed the exit “without a successor arrangement” and hailed “the overall successful implementation of the program.” In a separate statement, IMF Managing Director Christine Lagarde said the bailout of Cyprus had delivered “an impressive turnaround of the economy.”
Cyprus, an island nation in the eastern Mediterranean, has gone from a sick patient that came close to shattering the euro area in March 2013 to a model of economic adjustment, with some bumps along the way.
The initial rescue package was thrown out by Cypriot lawmakers because it included a tax on insured bank deposits, roiling markets and forcing Europe and the IMF to come up a week later with a new deal that shuttered the country’s No. 2 lender, Cyprus Popular Bank Pcl, imposed losses on uninsured depositors and prompted the government to introduce capital controls.
As the fifth euro country to receive emergency aid after Greece, Ireland, Portugal and Spain, Cyprus struggled in the early part of its rescue in 2013 to ensure Bank of Cyprus Pcl emerged from resolution and to meet creditor demands for tighter foreclosure rules so banks could tackle bad loans.
In their statements on Monday, the euro area and IMF highlighted improvements in the health of Cyprus’s lenders, with the finance ministers saying the Cypriot banking system “has undergone a deep transformation” and Lagarde saying it “is on a much more solid footing and workouts of non-performing loans are accelerating.”
At the same time, Cyprus’s euro partners urged the completion of one bit of unfinished business in the aid program: the privatization of the Cypriot Telecommunications Authority.
The state asset sale, together with a public-administration overhaul and other structural reforms discussed during the program, would cement improvements in public finances and support sustained economic growth, the ministers said.
Cypriot Finance Minister Harris Georgiades said he’s confident the country will retain access to bond markets because the government’s economic-adjustment effort is set to continue.
“We continue the effort seriously,” Georgiades said on Twitter, “far away from populism and from past mistakes.”