Euro ministers back 10 billion euro Cyprus bailout

Fri Apr 12, 2013 10:59am EDT
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By Jan Strupczewski and Annika Breidthardt

DUBLIN (Reuters) - Euro zone finance ministers backed a 10 billion euro bailout for Cyprus on Friday and the European Commission said it would try to help the island's economy grow again with better use of EU structural funds.

The ministerial support opens the way for several euro zone countries, including Germany and Finland to seek approval for the three-year bailout in national parliaments, so that loan agreement with Nicosia can be signed by April 24.

The first tranche of the loan - 9 billion of which will come from the euro zone and 1 billion from the International Monetary Fund - will flow to Nicosia in mid-May.

The euro zone loans will have an average maturity of 15 years and maximum maturity of 20 years.

"The Eurogroup considers that the necessary elements are now in place to launch the relevant national procedures required for the formal approval of the ESM financial assistance facility agreement for an amount of up to 10 billion euros, subject to IMF's contribution," the euro zone ministers said in a statement.

To cover its financing needs over three years, Cyprus itself will have to come up with 13 billion euros of its own, with the bulk of that sum coming from the closure of its Laiki bank and the restructuring of the Bank of Cyprus.

The amount that Cyprus would need to contribute on its own had been estimated a month ago at around 7 billion, but the two sums were not directly comparable, EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference.

"People have been comparing apples with pears and coming up with oranges," Rehn said.   Continued...

Cyprus' President Nicos Anastasiades addresses a conference of civil servants in Nicosia March 29, 2013. REUTERS/Bogdan Cristel