BRUSSELS: Finance Minister Vassos Shiarly is attending today’s the Eurogroup meeting “empty-handed” in so far as the amount required for the re-financing of Cyprus’s banks has yet to be established. The amount is expected to make up the bulk of the funds requested by Cyprus in an EU bailout.
According to a report in top German newspaper Der Spiegel, meanwhile, a number of his EU counterparts will also be approaching Shiarly to demand that a team of experts from their country come to Cyprus to investigate amid ongoing concerns about money-laundering.
No final decisions are expected to be taken as regards Cyprus’ request for a bailout, since the amount for the recapitalization of the Cypriot financial system has not been finalized yet.
Cypriot Finance Minister Vasos Shiarly is expected to inform his European counterparts about the implementation of the draft agreement with the Troika (European Commission, European Central Bank, International Monetary Fund).
On June 25, Cyprus requested financial assistance from the European Stability Mechanism, as its two major banks sought state support after massive write-downs of their Greek bond holdings amounting to 4.5 billion euro, as a result of the Greek sovereign debt haircut. The Cypriot authorities and the Troika have agreed on a Memorandum of Understanding containing the conditions of the package estimated at 17.5 billion euro.
The package cannot be finalized as a due diligence review that would determine the capital needs of the Cypriot banking sector is still pending. The draft memorandum says that the Cypriot financial sector will require up to 10 billion euro. Economists argue that if the capital needs reach 10 billion the Cypriot sovereign debt may reach to no-sustainable levels.
Meanwhile, on Friday, an EU official told journalists that the Cypriot financial assistance programme cannot be finalized before mid March, pointing out that Cyprus must proceed with a privatization programme.
During today’s Eurogroup meeting, the Finance Ministers will also discuss about the direct recapitalization of European banks through the European Stability Mechanism, Ireland’s request to exit the Troika program before the end of the year, as well as the next aid tranche for Greece amounting to 9.2 billion euro.