A planned bailout for Cyprus, the fifth euro-area country to seek external aid, may contain a debt target of about 100 percent of gross domestic target in 2020, three European Union officials said on condition of anonymity because the talks are private.
In a replay of last year’s standoff over Greece, the International Monetary Fund is insisting that European loans for Cyprus come with steps to reduce the country’s debt burden. IMF Managing Director Christine Lagarde said last month that the plan for the country should address debt sustainability as well as a return to markets and economic growth.
The target now on the table shows how far Cypriot, IMF and euro-area officials have to go if they’re to conclude a rescue deal by their end-March deadline. The Cypriot Finance Ministry said Jan. 10 that bailing out the country may push debt to a peak equal to less than 140 percent of gross domestic product in 2014. The EU estimates Cypriot debt at 93.1 percent of GDP this year, without accounting for any potential aid.
The bailout may equal the size of 18 billion-euro ($23.4 billion) Cypriot economy. The government sought assistance after its banks suffered losses of 4.5 billion euros in Greece’s sovereign debt restructuring. Nicos Anastasiades, who took over as Cypriot president late last month, will ask Greek Prime Minister Antonis Samaras for some of the Cypriot banking system’s recapitalization to be covered by funds earmarked for Greek banks, ANA reported.
Anastasiades, who took over as Cypriot president late last month, attends his first EU summit next week as bailout talks continue with the IMF, European Commission and European Central Bank. He’ll speak with German Chancellor Angela Merkel by phone tomorrow, Greek state-run Athens News Agency reported today.
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