Cyprus in Talks with Troika over Bailout Package


The troika inspectors, or officials from the European Commission, the International Monetary Fund and the European Central Bank, arrive in Cyprus today for discussions over a bailout deal. Cyprus has become the fifth eurozone member to seek international aid after its banks buckled from contagion and large exposure to the Greek economy.

On Saturday, Cyprus finance minister Vassos Shiarly told reporters after chairing talks with European Union counterparts in Nicosia that it was difficult to determine the amount of aid required as it would depend on further talks on terms and conditions with the European troika.

Bailout estimates from the troika are still unclear, though some sources put the figure at 10 billion euros, more than half the size of its 17 billion euros economy.

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Sources told the AFP that “the troika reportedly wants to slash the state payroll by 15 percent, shave 10 percent off welfare benefits, reform or scrap the inflation-linked cost-of-living allowance and roll back government subsidised housing finance,” – measures that are unlikely to go down well with a general elections looming in five months.

“The island’s communist-led government has been resisting austerity moves that it says undermine an economy already in recession,” the AFP added.

Cyprus had formally applied for EU financial aid after in June after failing to secure emergency funds from either China or Russia. According to Shiarly, Cyprus is expected to reach an agreement on a memorandum of understanding with the EU lenders on a bailout within a month and a half.

While Cyprus is the eurozone’s third smallest economy and has a population of about 1.1 million, the Mediterranean island’s banking sector has been crippled by heavy exposure to Greece’s economic malaise.

Urging Cyprus and the troika to expedite talks, Eurogroup president Jean-Claude Juncker warned:

I think Cyprus and the troika have to speed up the process, with no time to lose and I am very confident that an answer to problems of this country, and they are very serious, will be found in the next coming weeks.

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