EU finance experts seeking ways to get Cyprus bailout deal

Fri Mar 15, 2013 6:53am EDT
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By Luke Baker and Annika Breidthardt

BRUSSELS (Reuters) - EU officials worked on a rescue package for Cyprus on Friday, hoping to get approval from the IMF and euro zone finance ministers later in the day.

Senior sources involved in the negotiations said the package is expected to contain a mixture of tax increases, one-off revenue raising measures, plans for privatizations and the overhaul of Cyprus's banking sector to ensure that funding for the bailout is sustainable.

It is possible Russia will help finance the program by extending a 2.5 billion euro loan already made to Cyprus and potentially reducing the interest rate, officials have said.

Cyprus, with gross domestic product of barely 0.2 percent of the bloc's overall output, applied for financial aid last June after its banks suffered huge losses following a European Union- approved writedown of Greek debt.

Progress was slow under a previous Cypriot government but without help Cyprus would slide into default, threatening progress made last year in convincing investors that the euro bloc can manage its debt problems.


The currency area's finance ministers, joined by International Monetary Fund chief Christine Lagarde, will meet in Brussels later on Friday. But even if ministers agree a plan it will not be definitive.

The troika of IMF, European Commission and European Central Bank has not yet presented a report on the state of Cyprus' banking sector, its economy and possible solutions, and a source said it would likely not do so on Friday either, making anything more than a political agreement impossible.   Continued...

European Union (EU) and Cypriot flags flutter atop the Presidential palace in Nicosia February 22, 2013. REUTERS/Yorgos Karahalis