Cyprus "very close" to deal with troika: finmin in paper

Reuters News
Posted: Oct 27, 2012 2:15 PM
Cyprus "very close" to deal with troika: finmin in paper

(Reuters) - Cyprus is close to an agreement on financial aid from international creditors, with only a few issues outstanding, its finance minister said in an interview.

Finance Minister Vassos Shiarly, in talks with a collective of lenders from the International Monetary Fund, the European Union and the European Central Bank, known as the Troika, told the Cyprus edition of Kathimerini newspaper there were "four or five" issues pending, which concerned matters of principle.

"We are very close. We believe the differences which remain with the Troika can be bridged ... there are a small number of issues to clarify, but the largest part of our differences have already been clarified," Shiarly told the paper in an interview for Kathimerini's Sunday edition, made available to Reuters.

He declined to specify what those disagreements were.

Cyprus sought financial aid from its EU partners and the IMF in June when a write-down of Greek debt sparked substantial losses at its two largest commercial banks.

Its financial sector's exposure to Greece and fiscal slippage shut Cyprus out of capital markets 18 months ago.

The island, one of the smallest in the euro zone, has said it is keen on a deal with creditors by next month, hoping to have an agreement ready by a euro zone ministers' meeting on November 12 in Brussels.

There is mounting speculation that without a deal Cyprus could face a cash crunch by the end of the year.

"It is exceptionally important to have something in place by Nov 12," Shiarly said. "Otherwise, things will get more difficult and we will have to then try even harder to handle the period which will follow."

Last week Cyprus presented its own austerity program to lenders, envisaging savings of up to 3.9 billion euros until 2016.

Cypriots have proposed staggered wage cuts in the public sector ranging from 6.5 to 12.5 percent and resisted calls for changes to wage indexation, or selling off profitable state-owned assets.

The troika has called for an across-the-board wage cut of 15 percent.

Cypriot banks suffered a loss of some 4.0 billion euros from Greece's debt writedown, a figure which represents 25 percent of the island's 17 billion gross domestic product.

Its total bailout needs are still unclear, though they are anticipated to exceed 10 billion euros, or about 60 percent of its GDP. That figure would include a bailout for banks, and for the island's fiscal requirements.

Asked whether Cyprus could conceivably require further action from the troika in the future, Shiarly said: "The impression we have is that the memorandum we will sign with the troika will be adequate to resolve Cyprus's problem.

"There will naturally be a review of progress every three months, but it is not anticipated that a second memorandum will be required."

(Writing by Michele Kambas; Editing by Helen Massy-Beresford)