Monday 20 November 2017

Bailout deal for Cyprus given green light by euro ministers

Rebecca Christie and Stelios Orphanides

EURO area finance ministers approved a bailout request from Cyprus and reaffirmed their commitment to aid Spain's banks as the single currency bloc grapples with its debt crisis.

No amount was specified for the Cyprus rescue, which will encompass the public sector as well as banks, according to a statement issued by Luxembourg's Jean-Claude Juncker after the ministers held a conference call on Tuesday. Cyprus also sought assistance from the International Monetary Fund.

On Spain, the group said aid to the country's banks, estimated to need as much as €62bn, could be provided by the euro area's temporary bailout fund, the European Financial Stability Facility, until the permanent European Stability Mechanism (ESM) is up and running.

The bailout programme would then be "transferred to the ESM," according to a separate statement. The group previously pledged as much as €100bn in aid.

Cyprus, which officials say may need as much as €10bn, this week became the fifth euro-area country to ask for help from the 17-nation euro area's firewall, following rescue requests from Greece, Ireland, Portugal and Spain. As the bloc tries to tackle the crisis sparked by Greece more than two years ago, German Chancellor Angela Merkel has insisted that aid requests be tied to strict controls on budgets and banking.

Aid to Cyprus, as for Spain, could come from either of the euro area's firewall funds. The ESM is set to begin operations on July 9.

Euro finance ministers discussed the aid requests a day before EU leaders convene in Brussels for a summit, their 19th since the debt crisis began.

Officials say those talks will focus on a long-term road map for co-ordinating finances and banking supervision, rather than short-term solutions to help Spain, Cyprus and other struggling states.

Cypriot officials have tried to limit the aid request to the banking sector, while the EU has signalled its plan to proceed with a full slate of economic and financial sector conditions.

Request

Yesterday's announcement says the request will be considered by the so-called troika of the European Commission, the European Central Bank and the Washington-based IMF, which yesterday confirmed it had received a Cypriot aid request.

Cypriot Finance Minister Vassos Shiarly said his country would not withdraw its bailout request, a possibility that had been reported in local media. While pursuing EU aid, Cypriot officials have investigated the prospect of a loan from Russia or China. Mr Shiarly said this search would continue.

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