Troika Begins Negotiations in Cyprus

Update: Representatives of the Troika (ECB, IMF, European Commission) arrived today to start negotiations over Cyprus' bailout amid uncertainty over whether the government has enough cash to pay its obligations at the end of the month.

Finance Minister Vassos Shiarly's request for the Electricity Authority of Cyprus (EAC) to lend it 200 million euros from its employee pension fund was rejected last week. The EAC will not participate in a lending programme to the government, said board member George Pistentis. But the organisation will continue to support in other ways, like it did when it bought a large amount of Cyprus bonds at the beginning of the year, he said.

Opposition MPs have warned that there is imminent danger that the government will not be able to pay pensions, maturing debt and salaries at the end of the month, and needs an estimated 500 million euros. So far it has managed to gather 175 million euros from semi-government organisations like the Ports Authority and CYTA.

State sector, financial sector reforms

The Troika will meet with Finance Minister Vassos Shiarly and political parties and is expected to be firm on its position that Cost of Living Allowance (CoLA) should be reformed, the retirement age should be increased and the financial sector and public sector should be restructured and downsized.

"The second round meetings will take place at a technocratic and political level. The main aim of the meetings is the further discussions on various issues, including the assessment of macroeconomic trends, prospects for public finances and the recapitalisation needs of the financial sector. Furthermore, the meetings aim at developing common views with regard to the main challenges currently facing the Cyprus economy as well as the appropriate strategy and policy responses," according to a finance ministry statement.

The second round of talks will be wrapped up by July 27th, said the finance ministry.

The finance minister has also sent representatives to Russia to discuss the government's request for a loan from Moscow. Analysts say that Cyprus needs a bailout of at least 10 billion euros to rescue the financial sector and wider economy. Standard & Poor's has estimated the bailout could reach 15 billion euros.

Cyprus' GDP last year was 17.6 billion euros.

File photo of IMF economist Delia Velculescu: AP

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