News / Europe

Cyprus Bailout Moves Forward; EU Eyes Bank Stabilization

Cyprus' Finance Minister Harris Georgiades (C) and Central Bank of Cyprus Governor Panicos Demetriades (R) sit with Holland's Finance Minister Jeroen Dijsselbloem in a portrait session at Dublin Castle during an informal meeting, Apr. 12, 2013.
Cyprus' Finance Minister Harris Georgiades (C) and Central Bank of Cyprus Governor Panicos Demetriades (R) sit with Holland's Finance Minister Jeroen Dijsselbloem in a portrait session at Dublin Castle during an informal meeting, Apr. 12, 2013.
VOA News
European Union finance ministers are pushing ahead with plans to bail out Cyprus and stabilize Europe's banking sector.

Ministers meeting in Dublin, Ireland Friday faced questions following reports that the cost of the Cyprus bailout had jumped by several billion dollars.  But EU Monetary Affairs Commissioner Olli Rehn said such worries were not justified.

"People have been comparing apples and pears and coming up with oranges. I will refrain from remarking that this is what happens when stories are written based on leaked documents,'' Rehn said.

The $13 billion bailout plan calls for Cyprus to contribute about $9 billion.  But the costs may still grow.  Rehn confirmed Friday the economic fortunes of the offshore tax haven are worse than first thought.

"We are revising the growth forecast and of course there is plenty of uncertainty about the exact trajectory of economic growth in Cyprus,'' he explained.

Before the meeting, Cypriot Finance Minister Harris Georgiades was resolute. "We have a deal and we shall make it work,'' Georgiades asserted.

The bailout deal Cyprus patched together with international lenders must still be approved by the parliaments of several EU countries before aid can start flowing, as early as next month.

Also Friday, the ministers agreed on the creation of a single supervisory mechanism to watch over European banks.  

Rehn said the move will "further enforce financial stability."

To help ease the financial crunch, Cypriot officials say they are looking at other types of aid, some from the EU.  But to raise additional money, the island could be forced to sell about three-fourths of its gold reserves for about $524 million, levy additional taxes and sell state assets.  

The terms of the bailout have already required Cyprus to confiscate 60 percent of the deposits of its biggest account holders, many of them wealthy Russians.

Such terms continue to upset many Cypriots, like shop owner Ritsa Constantinou, despite her growing optimism that the country's fortunes are improving.

"They shouldn't be so strict. They're choking us," she said. "On the one hand they give us a loan, but they say you have to repay it tomorrow. This isn't possible. If I weigh 100 kilos and the doctor tells me you have to lose weight tomorrow, will I be able to lose it in one day?''    

Such anger may continue to simmer.  Eurogroup finance ministers agreed In Dublin to give Ireland and Portugal  another seven years to repay emergency bailout loans.

Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem says "Ireland is a living example that adjustment programs do work, provided there is a strong ownership and genuine commitment to reforms."

But Nicosia shop owner Luis Komitis sees nothing wrong with continuing to help Cyprus be accountable.

"I don't believe our partners in Europe want what's bad for us.  I am one of those who believe that Germany, as well as Holland, who we wrongly accuse every day, want what's best for us," Komitis said. "They want to sort out the mistakes that happened in the past, repeatedly, and for many years and by all governments. Germany, and the other countries we accuse wrongly every day, are the ones who want to help us."

Cyprus is the fifth of the 17 nations in the eurozone to need a bailout. But it is the first time that other European countries, the European Central Bank and the International Monetary Fund forced large bank depositors to pay part of the cost.

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