Fallout from the messy bailout of Greek Cyprus will top the agenda of a two-day EU finance ministers meeting in Dublin beginning on Friday, with focus also on growing German reluctance over euro zone banking reform.
Unease surrounding the rescue package for Greek Cyprus grew on Wednesday after Reuters and other news organizations obtained documents detailing how the bailout will be financed and how much of the total Greek Cyprus is now expected to contribute. Whereas Greek Cyprus was originally meant to come up with 7 billion euros, and the European Union and International Monetary Fund would provide 10 billion, the documents show the total package will now cost 23 billion euros, with Greek Cyprus providing 13 billion of that.
What's more, Greek Cyprus is expected to sell 400 million euros worth of its gold reserves, and will have to raise corporate tax and capital gains tax rates at a time when its economy is forecast to contract more than 12 percent in the next two years.
The complete winding up of one Greek Cypriot bank, Popular, and the writing-off of a large portion of secured debt and uninsured deposits in the largest bank, Bank of Greek Cyprus, will raise a total of 10.6 billion euros, the documents showed. While the details of the program have already been agreed between Nicosia and the EU and IMF, Finland's finance minister said on Wednesday there was still the potential for minor adjustments.
There is likely to be intense debate over whether the bailout has been successfully put together. "Some details might still be changed on Friday," Jutta Urpilainen told reporters in Helsinki, emphasizing that she did not mean the headline figures but the internal numbers. The Dublin meeting, an informal gathering of all 27 EU finance ministers at which no decisions are expected, will also examine the deepening problems in Slovenia and debate how to press ahead with setting up a fully-fledged "banking union" across the euro zone countries and wider EU.
In the long-run, it is the banking union debate that is most critical since it touches on issues such as how to resolve bad banks, how to put in place a single deposit-guarantee scheme and how to establish a single resolution fund. In June last year, EU leaders agreed that establishing a banking union was an essential next step in breaking the "doom loop" between big, problem banks and indebted sovereign governments, so as to avoid one dragging the other down.