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Cyprus seeks to 'front load' EU bailout funds

Eurozone officials say Cyprus has not asked for more money, but would prefer to put EU structural funds to earlier use.

Last Modified: 12 Apr 2013 10:44
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Cyprus confirmed the cost of its EU-IMF bailout has surged to $30bn, putting more pressure on economy [AFP]

Cyprus is not asking for a bigger bailout from the eurozone and the International Monetary Fund (IMF) above the agreed $13bn, but is considering putting the EU structural funds to earlier use to help the country's growth, EU officials have said.

Eurozone finance ministers gave political backing to $13bn, or 10 billion euros, of loans for the Mediterranean island on Friday and said there were no plans or requests to raise that amount.

Marianne Kothe, German finance ministry spokeswoman, said there were no plans or requests to raise that amount and that it was "not up for negotiation".

Cypriot President Nicos Anastasiades told reporters in Nicosia on Friday that he would send a letter to European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy to give it extra assistance given the bad economic situation of the island.

He did not elaborate on what additional support he was seeking.

Eurozone officials in Dublin said Cyprus had not asked for more money in emergency loans, but was most likely considering a request front load the payment of EU structural funds that come from the EU's long-term budget.

'Critical times'

Anastasiades said earlier that he had already spoken to European Union Economy and Euro Commissioner Olli Rehn ahead of a key meeting of eurozone finance ministers in Dublin later on Friday that is due to finalise the bailout terms.

... Letter will refer to the need for EU policy to change towards Cyprus by giving it extra assistance, given the critical times we are going through as a result of the economic crisis and the measures imposed on us

Nicos Anastasiades,
President of Cyprus 

"The letter to Mr Barroso and Mr Rompuy will refer to the need for EU policy to change towards Cyprus by giving it extra assistance, given the critical times we are going through as a result of the economic crisis and the measures imposed on us," Anastasiades told reporters.

Under the preliminary bailout terms agreed with international creditors last month, Cyprus was already drastically downsizing its once-lucrative banking sector, raising taxes, reducing the public sector workforce and privatising state-owned utilities to raise $9.0bn.

But the government acknowledged on Thursday that the costs have now soared to $30bn and that the European Union, the European Central Bank and the International Monetary Fund are demanding that Cyprus fund the $8bn shortfall too.

Anastasiades denied that the additional costs were the result of the uncertainty that has rocked the economy during the marathon negotiations since he took office in February.

"I do not think it is the last three months but a general delay that has led us here," he said. "It will be addressed."

The Mediterranean nation said on Thursday that a sale of its gold reserves was among the options for its contribution owards an international bailout, but ultimate responsibility rested with its central bank.

Broader concerns

During their Dublin talks, the finance ministers will also consider extending debt repayment dates for Portugal and Ireland.

The weekend meeting marks a return to the market and international stage for Eurogroup chairman Jeroen Dijsselbloem, who was heavily criticised for his handling of the aftermath of the Cyprus deal.

After Cyprus, is Slovenia the next eurozone domino? 

After months in which the EU debt crisis appeared to lessen at least, Cyprus has reignited broader concerns.

Worries that Slovenia may need a bailout refuse to go away, Spain faces record unemployment and the political deadlock in Italy has fuelled worries that the eurozone's third largest economy may not be able to stay on top of its massive debt.

Alongside host Ireland, Portugal is seeking a 15-year relaxation on the repayment terms of its rescue loans - with a possible compromise at seven years, according to EU officials.

Portugal appears ready to offer fresh "guarantees," a top source underlined.

Meanwhile, the renewed drive to stamp out tax fraud, launched amid a scandal embroiling French President Francois Hollande's government, should also feature prominently.

Inspired by a 2010 US law requiring automatic reporting of bank account information, Britain, France, Germany, Italy and Spain this week agreed to work on setting up a multilateral information exchange facility they hope will serve as a template for a wider system.

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Source:
Agencies
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