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Europe refuses additional aid to Cyprus

12 April 2013 / 19:04:06  GRReporter
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The finance ministers of the 17 euro zone countries have approved the bailout agreement to Cyprus. "The Eurogroup considers that the necessary elements are now in place to launch the relevant national procedures required for the formal approval of the ESM financial assistance facility agreement for an amount of up to 10 billion, subject to IMF’s contribution," reads the official communiqué of the meeting of the finance ministers.

"The programme for Cyprus is going to be 10 billion euro as agreed," firmly states Eurogroup’s chairman Jeroen Dijsselbloem. The politician explains that the rest of the aid will be financed from the bail-in of the banks (cuts of deposits exceeding 100,000 euro, losses incurred by shareholders, etc.) as well as from privatizations or other measures, making it clear that Europe will not provide additional aid to Cyprus.

The Cypriot government has recently announced that the 10 billion euro promised by Europe in combination with the 5.8 billion euro, which will come from the imposition of a tax on deposits, will not be enough for the country to fill the fiscal gap in the budget. With the IMF’s contribution, the total amount of the bailout reaches 17 billion euro.

According to the latest data, Cyprus needs 23 billion euro. President of the Republic Nikos Anastasiades has sent an official letter to European Commission President Jose Emmanuel Barroso, notifying him of the specific issue. "The letter to Barroso and Rompuy stresses the need for a change in the EU’s policy stance toward Cyprus with extension of further aid, in light of the critical moments we are going through as a result of the economic crisis and the measures that have been imposed on us," said Anastasiades cited by Naftemporiki.

The request not only has been ignored, but has also remained unheard. European Union Commissioner for Economic Affairs Olli Rehn firmly stresses that Cyprus will receive from Europe financial aid of up to 10 billion euro.

The request not only has been ignored, but has also remained unheard. European Union Commissioner for Economic Affairs Olli Rehn firmly stresses that Cyprus will receive from Europe financial aid of up to 10 billion euro. Germany’s government representative Steffen Seibert, in turn, determines the aid too large for the size of the country and rejects the idea of ​​additional funding too. "There are no plans or requests for increasing the amount," continued the denials Marianne Cote, representative of the German Ministry of Finance, cited by Ethnos.

The first tranche of the financial aid to Cyprus is to be paid by the middle of May this year. It seems that it will not be enough for Cyprus to significantly cut the large deposits to restore the local economy and it is expected that the country will follow the example of Greece - reductions of pensions, cuts of salaries, cuts of welfare benefits, increases in taxes and general contraction in spending. It is also expected that the economic situation will deteriorate and that unemployment will increase. However, recent data indicate that bookings for the summer season in Cyprus have not declined significantly.

Meanwhile, the country has already allowed the withdrawal of 300 euro in cash from a bank. Bank transactions of up to 300,000 euro in the country have been also allowed. A special committee of the Ministry of Finance must approve individual or business transactions exceeding 300,000 euro. There are no additional procedures for transactions amounting to between five thousand and twenty thousand euro. A specific scale of fees is in force for amounts from 21,000 to 300,000 euro. The special committee considers separately each case of bank transactions exceeding 300,000 euro. The cash amount with which the citizens of Cyprus are allowed to leave the country has been increased from one thousand to two thousand euro.

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