NICOSIA, Cyprus (AP) — Cyprus' potential international creditors said Friday they have made "good progress" in negotiations on a possible bailout for the crisis-hit country.
Despite earlier hopes that a deal was imminent, representatives from the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund said long-distance talks would continue on securing an agreement. Once an agreement has been reached, Cyprus will become the fourth member of the 17-strong group of European Union countries that use the euro to receive international help with its debts.
The troika representatives said they are awaiting the preliminary results of an investigation into how much Cyprus' ailing banks will need to shore up their finances. This will help determine the size of a bailout that won't push the country's debt to unsustainable levels.
"Discussions are expected to continue from respective headquarters with a view to making further progress toward a potential program," a troika statement said.
Cyprus' Finance Minister Vassos Shiarly explained that the government has reached an "in-principle agreement" with the troika on the terms of the bailout deal.
"Negotiations will follow which can't be completed at this time because they have to do with the recapitalization of banks and we'll have that amount at the beginning of December," Shiarly told reporters.
Shiarly said that once the recapitalization figure is calculated, a bailout accord can then be finalized. Cyprus' euro partners should then be able can rubber-stamp the deal when they meet next month, possibly on Dec. 12, he added.
The minister said parliamentary approval from eurozone member countries is expected to come at the end of January when Cyprus will be able to draw the cash it needs from the EU bailout fund to keep its banks and economy afloat.
The exact figure on the banking sector's needs is crucial, given its large size relative to the Cypriot economy. Credit ratings agency Fitch said Friday that the banks' assets are worth four times the size of the country's €17.5 billion ($22.5 billion) economy.
While most of the bailout is expected to go to recapitalizing banks, around €7.5 billion will be channeled to refinancing the country's debt and cover fiscal shortfalls over the deal's four-year timetable.
Cyprus sought international aid in June to save its banking sector from collapse after banks failed to replenish huge losses they suffered on bad Greek debt and loans. The country has been unable to borrow from international markets for over a year because of its junk credit rating. Continued...