Cyprus' bailout talks to restart this week

AP News
Posted: Nov 07, 2012 1:20 PM

NICOSIA, Cyprus (AP) — Talks with potential creditors on forging a bailout agreement for Cyprus will resume this week, the government spokesman said on Wednesday, easing concerns over the status of the negotiations in a country facing a cash crunch toward the end of the year.

Spokesman Stefanos Stefanou said in a written statement that a negotiating team, made up of representatives from the European Commission, European Central Bank and International Monetary Fund, is due to arrive Thursday. Talks between the Cypriot government and the so-called troika are then due to restart the following day.

"In light of the troika's arrival to Cyprus, the government reaffirms its determination to continue negotiations intensively, seriously and assertively with the aim of achieving an agreement on a loan form the support mechanism the soonest," Stefanou said.

However, Stefanou provided no details on the talks are expected to conclude.

Cyprus, a country of around 860,000 people with an €18 billion ($22.94 billion) economy, sought financial aid in June to support its ailing banks after they suffered massive losses from their exposure to bad Greek debt. It also needs the money to pay its bills because it has been unable to borrow from international markets for more than a year.

The bailout is expected to be between €11 billion and €17 billion ($14 billion and $22 billion). The difference is owed mainly to widely divergent estimates on the amount Cypriot banks will need to recover.

Before agreeing on the rescue loans, the potential bailout creditors need to make sure that Cyprus' policies are likely to bring its debt back down to affordable levels. Because of the sensitive nature of government spending cuts, such talks can take time to complete.

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Stefanou appealed for domestic unity ahead of the negotiations and urged for an end to "speculation and rumor mongering" that creates confusion and spreads panic among the public and which "detracts from the goal of an agreement, which under the circumstances would best serve the interests of our country."

Word of the bailout came as the European Commission issued a dour outlook on Cyprus' economy, projecting that it will shrink 2.3 percent of gross domestic product this year and by 1.7 percent in 2013. Unemployment will continue to worsen, reaching almost 14 percent in 2014 as more jobs are lost in the slowing construction and trade sectors.