UPDATED 11.40 The government said today that the troika of international lenders will arrive in Cyprus tomorrow and negotiations on a financial aid package will resume on Friday.
"The government has been informed that a team from the troika is arriving in Cyprus tomorrow Thursday and on Friday negotiations resume with the aim of securing an agreement on the (adjustment) programme for a Cyprus loan," government spokesman Stefanos Stefanou said in a statement.
Yesterday, the government said it was prepared for any contingency, including the possibility of a deal being pushed back to 2013.
“All possible scenarios are on the table [for a bailout deal]...even for 2013, and we are ready for them,” government spokesman Stefanos Stefanou said.
He said the government was in constant communication with the troika, while at the same time “keeping open the channels” with Russia for a possible bilateral loan.
In the meantime, the list of reasons for the troika no-show grows ever longer. From initial stalling by the government to warnings from Germany, to leaked troika documents saying Cyprus was not cooperating, the saga has moved in the past three days to moneylaundering accusations on Monday, and yesterday to a reported dispute between the IMF and its European partners in the troika over the Cypriot banks.
Reports last night suggested the announcement of a date for the troika’s visit was imminent, placing the experts’ arrival here on Friday or Monday.
However IMF sources in Washington told the Cyprus News Agency (CNA) the date was still to be determined.
The latest reason for the delay is said to be disagreement between the IMF and its EU partners over the banking sector reports but the sources would not confirm this. “There are no Europeans and IMF, but only the troika. We have not yet decided when the mission will begin in Cyprus,” the sources told CNA.
Germany, whose finance minister showed a distinct lack of patience with Cyprus last week appeared to be upping the ante on Monday with reports appearing in Der Spiegel quoting Germany's intelligence agency (BND) as saying money laundering in Cyprus had laid bare the political risks involved in approving a bailout. The implication was that “Russian oligarchs and mafiiosi’ who have parked “their illegal earnings in Cyprus” would be the ones to profit most of all from the billions in European taxpayer funds. This was a reference to the island’s low corporate tax rate, which Berlin would like to see harmonised Europe-wide. The tax rate is one of the Cyprus government’s ‘red lines’ however.
Yesterday the Associated Press reported that German lawmakers would be allowed to review the classified intelligence report on alleged Russian money laundering in Cyprus before voting on a bailout for the country.
Several German lawmakers since voiced concern over the bailout, the AP said. The opposition Greens' lawmaker Priska Hinz said the government agreed yesterday to share the intelligence report, saying "especially on Cyprus, by now there are more questions than answers."
Earlier, state broadcaster CyBC was receiving, from Berlin, reports similar to those on CNA regarding the reported IMF-EU differences over the Cypriot banks.
The IMF is said to rate recapitalisation at €15 billion, while the European Commission is looking at between €9 billion and €11 billion, the reports said.
The state broadcaster said moreover that the European Commission experts are ready to fly to the island, but are being delayed because their IMF colleagues on the troika team are still awaiting the official go-ahead from IMF chief Christine Lagarde.
Having more than likely missed the November 12 deadline for concluding a bailout deal, the next meeting of euro area finance ministers scheduled for next month. By then, however, state coffers could run out of cash.
Reports suggested yesterday that Cyprus has also been caught in the midst of a tug-of-war between the IMF and the EU over the timing of the establishment of a Single Supervisory Mechanism (SSM) for eurozone banks.
The IMF is pushing for the SSM to be set up as soon as possible, whereas some EU countries want to take it slow.
Earlier this year EU leaders forged a tentative deal, representing a shaky compromise between the Germans and French, who had been tussling over how to shore up the eurozone’s stricken banking system — one of the main causes of Europe’s debt crisis.
At the moment, money to help put banks has to go through a country’s government — placing more strain on state finances.
France has been pushing to get all banks in the 17 euro countries under the supervision of one European body by the end of this year.
But Germany’s Chancellor Angela Merkel, wary of using taxpayers’ money to prop up other countries’ banks, tried to put the brakes on the plan, insisting that creating the supervisor should be done slowly and that “quality must come before speed.”
Reports suggested Merkel, facing elections next year, is seeking to delay a bailout of Spain’s and Cyprus’ banks until after the SSM is in place – which could take several months.
Cyprus applied for an EU and IMF bailout in June after its two largest banks sought state aid to help with massive losses incurred by the Greek debt write-down earlier in the year.
Meanwhile Cyprus yesterday secured EU regulatory approval for a guarantee scheme for its banks on condition that lenders that get help limit their expansion and provide viability plans to ensure they do not have an unfair advantage over rivals.
The two largest banks in Cyprus suffered huge losses due to writedowns of Greek debt and they turned to the government for aid in recapitalising. The European Commission said Cyprus notified regulators of its proposed bank guarantee scheme which will cover new loans agreed and new bonds issued before December 31, with a maturity of up to five years.
The executive Commission said the scheme complied with EU state aid rules, but it laid out some conditions for applicants to the plan.
"Beneficiaries will be subject to behavioural commitments to avoid any abusive use of the state support. These include limitations on expansion and marketing and conditions for staff remuneration and bonus payments," it said in a statement.
"Finally, Cyprus has committed to notify viability plans for companies making intensive use of the scheme. The Commission has, therefore, concluded that the guarantee scheme is an appropriate means of remedying a serious disturbance in the Cyprus economy.”
The Commission has approved similar plans for a raft of countries in the 27-European Union bloc in the last three years.
Latest reports suggest IMF chief Christine Lagarde is putting the brakes on