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A day after Nicosia made a formal request for financial aid to Cyprus the European Commission has announced the initiation of talks to specify the economic programme. Spokesman for European Commissioner Olli Rehn, Amadeu Altafaj said that Eurogroup has entrusted the task to the so-called Troika and the whole procedure will be monitored by its head, Jean-Claude Juncker.

The decision of granting financial aid will be adopted at the next meeting of finance ministers of euro area member countries on 9 July or earlier in a conference call. Amadeu Altafaj explained that if the implementation of a rescue programme for the financial sector and budget of the island country were approved, then it would involve the European Commission, the European Central Bank and the International Monetary Fund.

According to sources from Brussels, the financial aid to Cyprus could reach 10 billion euro, which is equivalent to half the gross national product of the country.

A Reuters’ report, citing an unnamed source from the headquarters of the European Union, states that 6 billion could be allocated for the financial needs of the country and another two billion for the recapitalization of Cypriot banks. However, he said that this was an optimistic scenario. He added that the actual amounts would be seven billion euro to cover the needs of the state and three billion for the recapitalization of banks. A second source, also unnamed, confirmed to Reuters that the total amount the Republic of Cyprus is expected to receive is ten billion.
 
So far, the Cypriot government believes that the conditions the future creditors will lay down will not be particularly severe. In an interview with the public RIK television, government spokesman Stefanos Stefanou said that there have been no signs so far that the creditors could require an increase in corporate tax. He noted that Cyprus is still waiting for a response for the grant of interstate loans, which he said would be "an argument in the negotiations."

Indeed, Nicosia is continuing to try to obtain loans from Russia and China. For this purpose, President Dimitris Christofias has sent the Minister of Trade Neoklis Silikiotis to Beijing to lobby.

The island country sent its formal request to be included in the European Financial Stability Facility on Monday in a short message. "The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spillover effects through its financial sector, due to its large exposure in the Greek economy," it reads.

All parties except the ruling AKEL criticized the actions of the government and President Christofias. Their leaders, however, participated in a meeting convened by the President to inform them of the status of the Cypriot economy.

The Central Bank of Cyprus approved the decision of the government. "It is also necessary to take all measures to prevent any possible future negative impacts due to the activities of Cypriot banks in other countries."