IMF to send mission to Cyprus next week, after request for bailout

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The International Monetary Fund on Thursday said it is going to send a “fact-finding” assessment mission to Cyprus next week, following a request by the Cypriot authorities for financial assistance.

Speaking during a press briefing, IMF Spokesman Gerry Rice, said that next week`s mission would pave the way for discussions "of a potential program."

He however did not say when bailout negotiations could begin.

"We should leave it to the joint mission of the EC(European Commission) -IMF to evaluate the situation and then come back to us," he said.

The IMF said that the mission will be headed by Delia Velculescu, Senior Economist at the IMF European Department and its aim is to assess Cyprus’ challenges.

Invited by CNA’s correspondent to comment on Cyprus’ request for an EU bailout, Rice said that “we stand ready to join the efforts of our European partners to help Cyprus return to stable and sustainable economic growth and a solid financial sector," , recalling the statement made yesterday by the IMF Managing Director Christine Lagarde.

He added that “we expect to send an IMF team to Cyprus to evaluate the situation in the field next week in preparation for discussions on an economic program to help Cyprus address the economic challenges it faces".

"This likely will be a mission jointly with our European partners," he said.

As a result of the Greek sovereign bond haircut, capital requirements for the island’s major Banks, Bank of Cyprus and Cyprus Popular Bank reached 3.56 billion euro. The government decided to underwrite a 1.8 billion euro capital issue by CPB with a view to increasing its Core Tier 1 Capital to 9% by June 30, while BOC announced it requested 500 million euro as state support to complete its recapitalisation. Excluded from the international markets, Cyprus turned to the EU bailout mechanism for financial assistance.

Moreover, according to well-informed sources, the 10 bln euro assistance may be more than the Cypriot economy requires, a discussion however on the final sum is deemed as premature prior to the on-spot assessment by the Troika.

The team responsible for Cyprus believes that a series of measures have already been taken by the Cypriot government, and that the country would probably not take recourse to the stability mechanism if the problem of the banks’ exposure to Greece did not exist.

On Cyprus’ efforts to secure a loan from another country, the same sources say that no limitations apply prior to drafting a program. After the memorandum however, it is added that such a loan would be subject to the negotiations between Nicosia and the Troika.

On the conclusion of the agreement, the sources said the IMF will try to finish it by the end of July, however there is no rush in order not to impact negatively on the quality of the program.

Since there are no immediate needs in the banks for liquidity after securing the funds, an agreement is also possible to be concluded in three months.