Published October 17, 2012
NICOSIA – Cyprus said on Wednesday it expected a final round of talks to start with lenders on badly needed aid next week, hoping to have a bailout in place by a euro zone finance ministers' summit in mid-November.
One of the smallest nations in the euro zone, Cyprus sought EU and IMF aid in June after its two largest banks suffered huge losses due to a write-down of Greek debt.
A conclusion with lenders on aid has been fraught with delays as the island's government attempted to get the public onside with an austerity package.
"I am sure we will have a positive conclusion to our request for aid," Cypriot Finance Minister Vassos Shiarly told reporters.
Asked by Reuters whether he expected discussions with lenders to start before the end of the month, he said: "Within the month, and certainly in the coming week. Time is restricted and there is not much time left."
Cypriot officials say the government is keen for a deal by mid-November. Without that, there is speculation that the island of one million inhabitants could face a cash crunch as early as December.
But with elections looming in four months and unwilling to take the flak for any fallout from unpopular austerity measures, the leftist government has apparently been biding its time on taking a stand on lenders' austerity proposals pending since July 25.
"If the problems were dealt with in a more timely manner our economy would be in a much better state, and we wouldn't be confronted with the dilemma of either going broke, or accepting onerous terms," said Photis Photiou, a senior official of the opposition centrist Democratic Party.
It is unclear how much aid Cyprus may require. The island has been unable to fund itself since it was shut out of capital markets 18 months ago.
Shiarly said a figure had not been set for Cyprus's financial needs because of a difference of opinion between the government and lenders on the recapitalization needs of banks.
There is widespread speculation Cyprus's bailout will exceed 10 billion euros ($13 billion), or 60 percent of its GDP. Cyprus's fiscal requirements until 2015 amount to about 5 billion euros.
The talks involve the European Commission, International Monetary Fund and European Central Bank, known as the troika.
In measures expected to generate 975 million euros in savings, they have asked for cutbacks to an inflated public sector payroll, pension reform and creation of a 'bad bank' to assume problem exposures of the financial sector, mainly in Greece.
(Reporting by Michele Kambas; editing by Stephen Nisbet; Editing by Janet Lawrence)