Brussels, 09/01/2013 (Agence Europe) - Cyprus still intends to reach an agreement on a plan for international financial assistance before the presidential elections are held on the island (17 and 24 February), a European source told EUROPE on Wednesday 9 January (see EUROPE 10751). The German daily newspaper Handelsblatt had earlier reported that the resistance of the Cypriot president, Demetris Christofias, to the privatisation of public companies could push the Troika (European Commission, ECB and IMF) to continue negotiations with his successor. Though not standing in the presidential election, Christofias reiterated at the beginning of January that he had no intention of ceding to such a demand.
According to the same European source, the final report on the recapitalisation needs of the banking sector, led by Pimco and expected on 15 January, will determine if revenue from privatisation will be needed to contain the Cypriot debt at sustainable levels. The draft memorandum of understanding (MoU), which was leaked at the end of 2012, says that the Cypriot authorities should consider this option “if necessary to restore debt sustainability”. The total aid that Nicosia needs could be close to €17.5 billion, in other words about 100% of Cypriot GDP.
“The plan is for the draft MoU to be discussed at the Eurogroup on 21 January” before being formally signed at the meeting of the 17 eurozone countries on 10 February, the same source said. The Commission is being cautious in refusing to predict the outcome of this meeting. “What I can say is that work will conclude in due course and that we will ensure that financial stability is safeguarded”, said Simon O'Connor, the spokesperson the Commissioner for the Euro Olli Rehn.
The financial assistance programme will furthermore have to be approved by some national parliaments, including Germany. Although on Wednesday Chancellor Angela Merkel rejected the possibility of special conditions being granted to Cyprus, the German daily newspaper Süddeutsche Zeitung questioned the support of the German social democrat party (SPD) which is necessary at the Bundestag vote, just when German elections are looming on the horizon. If Merkel wants “SPD support for a Cyprus bailout package she will need good reasons. At present, I do not see them”, Sigmar Gabriel, SDP secretary general stated. In an attempt to bring the discussions to a successful conclusion, the Cypriot finance minister, Vassos Shiarly, is due to meet ambassadors from the eurozone states on Thursday in order to answer questions on the debt and also on the fight against money-laundering. (EL/transl.fl)