Eurogroup briefed on Cyprus

THE SO-CALLED Troika was last night expected to brief the Eurogroup meeting in Brussels on its visit to Cyprus to discuss the island’s request for EU bailout, though no final decisions are expected until late August.

The officials from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission (EC) - aka Troika - were only expected to consult with the eurozone’s finance ministers over Cyprus.

The bulk of discussions centred on Spain, though in both cases, final decisions were highly unlikely, mainly due to the many disagreements that arose between member states over the assistance that should be offered.

Greece’s progress since seeking bailout was also to be discussed.

Citing a European official, the CyBC last night said final decisions on Cyprus were expected by the end of August, while according to the Greek press, Cyprus was not expected to get the first instalment of its loan from the EU before October.

The government is also said to be aware of this, which is why it is seeking loans from semi government organisations, as well as other countries such as Russia.

A spokesman for EC Vice-president Olli Rehn yesterday said there would be a simple briefing about Cyprus at the Eurogroup, while he declined to comment when asked what the EC’s view was on the government’s efforts to secure a bilateral loan from Russia.

Meanwhile, Russia’s permanent representative to the EU, Vladimir Chizhov, yesterday said any loan from his country to Cyprus would be intended for the recapitalisation of its banks and not as financial help towards the EU.

Chizhov was quoted in the Russian media as saying that the aim was to help the island’s banks, which he said had unwittingly fallen victim to Cyprus’ close relations with the Greek banking system.

If talks end with an agreement, he added, it will be a bilateral agreement, which will have no relation with the country support programme implemented by the EC, ECB and IMF.

The island became the fifth eurozone country to apply for a financial lifeline from European Union support funds on June 25 as the debt crisis continued to engulf the currency bloc.

Cyprus’ woes stem from the heavy exposure of its oversized banking sector to debt-crippled Greece, leaving some Cypriot banks needing to be recapitalised. Leading credit ratings agencies have downgraded Cyprus to speculative grade territory.

In a statement on the aid application yesterday, the government pledged to shore up its economy after applying for bailout, saying it was committed to economic reforms and reducing its public deficit to within the European Union limit this year.

"Cyprus recognises these challenges and is committed to the achievement of fiscal targets and required structural reforms, the securing of necessary funds for the government financial needs, and the effective management of any challenges faced by the banking system," the government said.

"Cyprus remains committed to reducing its general government deficit below 3 per cent by the end of 2012, despite the adverse economic conditions," it added.