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Eurozone targets Cyprus bailout deal this month

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(Globalpost/GlobalPost)

Eurozone finance ministers were hopeful Monday of a warmer reception from their new Cyprus counterpart on bailout terms long resisted by the previous government, aiming to wrap up a deal by the end of March.

"We are probably going to reach agreement in March, that's what we're looking at," the head of the finance ministers' Eurogroup, Jeroen Dijsselbloem said as he went into the talks in Brussels.

"I am very glad there is a new government we can work with to find solutions for Cyprus," said Dijsselbloem, who is also Dutch finance minister.

The 16 ministers from the euro currency area met their new Cypriot counterpart, Michael Sarris, at talks that began shortly after 1400 GMT.

Sarris was named by incoming Cyprus President Nicos Anastasiades, who has vowed to save the near-bankrupt Mediterranean island from financial meltdown with the "earliest possible" bailout.

Eurozone ministers had put rescue negotiations on hold until after last month's election.

Nicosia first requested financial assistance in June.

An EU official speaking on condition of anonymity said it was "too soon" to envisage the outline of an agreement at Monday's talks.

The official said ministers would be keen to see if the new Cyprus government would take a different tack on issues that have held up an anticipated 17-billion-euro ($22.3 billion) rescue package -- roughly the same amount as a year's output for the Cypriot economy.

The official said these include allegations of large-scale money-laundering through the financial sector, doubts over debt sustainability in the medium term and a programme of privatisations the eurozone and International Monetary Fund demand.

Austrian Finance Minister Maria Fekter said Vienna has asked Cyprus to tighten up rules on money laundering despite some consitutional concerns in Cyprus, although she insisted that "we will solve that too."

On debt sustainability, Anastasiades has already dismissed any suggestion that investors or bank depositors should be forced to take part of the burden directly, as some in Europe have suggested.

"Any reference to a 'haircut' on deposits or public debt is not accepted," the president said recently, a point equally made by Sallis.

On privatisation, the signals in the Cypriot media have been less hostile than under the country's previous Communist president.

"I hope to be able to tell you more later," Dijsselbloem said.

As with neighbouring Greece's repeated bailouts, the position of Germany during a general election year is expected to prove crucial for any accord on Cyprus.

European Union Economic Affairs Commissioner Olli Rehn told German news weekly Spiegel Sunday that Cyprus might be forced to leave the eurozone if it did not get a bailout.

"Every euro member is systemically relevant," Rehn said, warning of the possible impact on the wider eurozone.

"If Cyprus became bankrupt in a disorderly way, the result would be almost certainly an exit from the eurozone."

German Finance Minister Wolfgang Schaeuble told another national newspaper that the Cyprus problem was "not easy to solve" but that an "appropriate" solution would be found.

In a more positive sign for the eurozone and an easing of the debt crisis strains, Latvia on Monday signed its formal bid to join the currency area.

Prime Minister Valdis Dombrovskis inked the document at a ceremony in Riga, paving the way for the Baltic state of two million to become the 18th eurozone member in January 2014.

The euro finance minsters talks broaden out on Tuesday to include the other 10 EU states that are not members of the euro, with discussion likely to be lively on planned bank bonus curbs which are staunchly opposed by Britain.

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http://www.globalpost.com/dispatch/news/afp/130304/eurozone-targets-cyprus-bailout-deal-month