THE ISLAND could request a bailout by international lenders by the end of this week, once an assessment by EU and IMF is complete, finance minister Vassos Shiarly said yesterday.
“The troika team has been in Cyprus for a few days. We are making very good progress, and I hope and anticipate a positive outcome toward the end of this week,” Shiarly told reporters in Brussels shortly before a meeting of the Economic and Financial Affairs Council (ECOFIN).
He did not elaborate. The finance minister was in the Belgian capital chairing ECOFIN.
Impressions on the progress of negotiations are changing by the hour; just a day earlier, media reports strongly suggested that a deal with the troika was nowhere near.
Mixed signals appear to have become the order of the day. On Monday the EU’s Economic and Monetary Affairs Commissioner Olli Rehn seemed to be growing impatient with the pace of Cyprus’ bailout request up to this point.
“It would have been important to achieve an agreement on the memorandum already earlier, because the situation is rather difficult, the economic and financial situation, it's rather difficult,” Rehn said in Brussels when asked about a bailout for Cyprus.
“But things are now moving forward,” he added.
The official’s comments came amid mounting speculation here as to when an overall bailout deal could be clinched.
The next scheduled meeting of the Eurogroup – before which a bailout deal is put for initial approval – is on December 3, although reports yesterday suggested that an extraordinary meeting of the group could be arranged for December 12 specifically to discuss Cyprus.
IMF Managing Director Christine Lagarde left a small window of opportunity regarding aid to the two main Cypriot banks, which may be concluded within a month.
“As you know there is an assessment of bank recapitalisation needs that is ongoing at the moment that is due to be concluded later in November, early December probably. That's an important factor to really assess the size of what is needed to be done as far as the banking system is concerned in Cyprus,” Lagarde said.
She was alluding to an asset review of Cypriot banks by investment company Pimco; the assessment will determine the extent of the banks’ bailout – the immediate cause behind the island’s request for assistance.
Meanwhile the troika teams continued their contacts here with a series of governmental agencies and regulatory authorities.
Yesterday they met with officials of the Securities and Exchange Commission to discuss issues relating to money laundering. There followed meetings with the Planning Bureau of the Ministry of Health, officials of the Health Insurance Organisation to discuss the proposed implementation of the National Health Insurance System (NHIS), the Cyprus Energy Regulatory Authority, the Commission for the Protection of Competition, and the Cyprus Tourism Organisation.
In the afternoon, the foreign experts saw representatives of the Interior Ministry, Land Registry and Town Planning.
The troika is said to be revisiting the issue of seizures of properties held against bad loans.
In its economic adjustment programme for Cyprus, delivered to the government in July, the troika had advised that “strong efforts should be made to maximise bank recovery rates for non-performing loans, while minimising the incentives for strategic defaults by borrowers.”
It proposed that “the administrative hurdles and legislative framework currently constraining the seizure and sale of loan collateral will be amended such that the property pledged as collateral can be seized and offered for sale within a maximum time-span of 1.5 years.”
But the government wants to extend the period after which banks can seize and sell such properties, to five years. Moreover, it proposes that owner-occupied housing be exempted from any asset seizures.
Reports yesterday said the international lenders have somewhat softened their stance and are now willing to extend to two years the seizures period for owner-occupied housing.
Today the troika experts will be meeting among themselves to take stock of the bailout negotiations that began on Friday.
They will also likely be meeting with the government’s negotiating team, comprising the finance minister, the commerce minister, the minister of labour and social insurance, the government spokesman and the Under-Secretary to the President.
Heading the troika mission to Cyprus are: IMF economist Delia Velculescu; Philipp Rother, head of the Fiscal Surveillance Section in the Fiscal Policy Division of the European Central Bank; and Maarten Verwey, the European Commission’s Deputy Director-General for Economic and Financial Affairs.
President Demetris Christofias with European Commission President Jose Manuel Barroso, President of the European Council Herman Van Rompuy and European Parliament President Martin Schulz in