The Eurogroup, the Finance Ministers of the Euro area have accepted Cyprus` application for financial assistance from the EU bailout mechanism, Cyprus Finance Minister Vassos Sharly said on Wednesday, following a Eurogroup teleconference.
In statements to the press, Sharly gave no details regarding the size of the financial assistance to be provided, noting that this would be determined following an audit by a team of experts of IMF, the European Central Bank and the European Commission who will arrive in Cyprus next week.
He said that the experts will scrutinize the Cypriot economy and will submit a report to the Eurogroup which will take the final decisions with regard to the size of financial assistance, as well as the terms under which this assistance will be provided.
Responding to a question, Sharly said that Cyprus` application concerned a fully-fledged programme, adding that "the experts are expected to cover all aspects, the baking sector recapitalisation needs, as well as the fiscal framework."
"They will come, they will evaluate the needs and when they examine both the (capital) needs of the banking sector as well as those of the public sector and they will decide on the size of the financial support," he said.
Responding to questions on the potential terms for the financial support, Sharly said the terms are negotiable, adding that the Commission’s recommendations for Cyprus issued on May 30 will be among the issues of the negotiations.
The Finance Minister appeared optimistic that the financial challenges facing Cyprus will be overcome.
"There will be some negative consequences on our economy but this is not something that cannot be overcome. On the contrary, the support that we will receive from the bailout mechanism will assist us not only to overcome the problems of the banks, but to support the economy and particularly growth," he said.
He went on to say that "as things stands today there was no way to stimulate growth because we need funding and funding is not possible because we have been excluded from the markets, while the banks at home have no such capability."
Replying to a question Sharly said that the impressions that countries under a financial support programme have lost their authority is flawed.
"The proof for this is the countries which submit their reports monthly to the Eurozone are very satisfied because the mechanism provided them with an opportunity to get out from a situation from which there is was other way out," Sharly noted.
Asked whether there are any news with regard to the application for a bilateral loan, Sharly said applications were submitted, adding however that nothing concrete has emerged yet.
Cyprus decided to underwrite a 1.8 billion capital issue by Cyprus Popular Bank which wrote off 2.3 billion euro from its books as a result of a Greek sovereign bond haircut .However the banking sector recapitalisation needs increased as Bank of Cyprus announced today it requested from the state financial support amounting to 500 million euro. The two banks must secure the needed capital to increase their Core Tier 1 Capital to 9% by June 30 as defined by the European Banking Authority.
