Eurozone finance
ministers on Friday formally approved the terms of a problematic Cyprus debt
rescue. The bailout for Cyprus marks an important shift in the eurozone crisis,
with bank depositors paying out to help fund the rescue.
The rescue deal is
worth $13 billion. Under the deal's terms, Cyprus will be responsible for
raising the remaining billions in the rescue package.
This week, questions
were raised over just how many billions that will be.
Initially the overall
package was gauged at around $22 billion. But documents leaked to the media
this week showed the overall price tag could be as high as $30 billion.
On Friday, eurozone
ministers meeting in Dublin formally approved the rescue deal, without raising
their own contribution to the package.
The deal is now ready
for approval by member states and the first tranche of the loan - cash badly
needed in Cyprus - could be ready by the middle of next month.
International lenders
have estimated that the economy of Cyprus will contract by nine percent this
year and almost four percent the year after.
Olli Rehn, the EU
monetary affairs commissioner, said Friday the economy could shrink by as much
as 15 percent this year alone.
"We are revising
the growth forecast and of course there is plenty of uncertainty about the
exact trajectory of economic growth in Cyprus," he said.
He said EU structural
funds aimed at boosting euro economies may be brought forward to help Cyprus.
Cyprus is implementing
spending cuts and banking sector reform to try to raise the funds it needs. The
banking sector in Cyprus is about eight times the size of the economy.
Bank depositors have
been forced to make their own contribution to the bailout, with a tax on
accounts containing more than $130,000.
Portugal and Ireland
were also on the agenda at the two-day meeting in Dublin.
Ireland received a
bailout in 2010 and the following year Portugal received its own bailout worth
just over $100 billion.
On Friday, the
ministers agreed to extend the bailout loans by seven years.
Jeroen Dijsselbloem,
the Dutch finance minister and Eurogroup president, spoke at a press conference
early in the day.
"The ministers of
the eurogroup would like to take a definite and positive decision on this
extension of the maturities of the loans for seven years, pending the decision
of the ECOFIN colleagues this afternoon," he said.
The eurozone is to
contribute just under $12 billion to the Cyprus bailout. Just over $1 billion
will come from the International Monetary Fund.
Sources :
http://www.voanews.com/content/cyprus-bank-bailout/1640167.html
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