IMF to provide US$1.3b as part of Cyprus rescue scheme
Source: Bloomberg News |
April 4, 2013, Thursday
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Print Edition
Print Edition
THE International Monetary Fund will contribute about 1 billion euros (US$1.3 billion) as part of a rescue program for Cyprus that aims to stabilize the nation's banks and reduce public spending, IMF Managing Director Christine Lagarde said.
The IMF announced a staff-level agreement with Cyprus on the 10 billion-euro program, hashed out with euro-area authorities on March 25. The deal calls for Cyprus to restructure its two largest banks, cut budget deficits and adjust its wage and pension systems.
"This is a challenging program that will require great efforts from the Cypriot population," Lagarde said in a statement. "We believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path toward a recovery."
Lagarde and European Union Economic and Monetary Affairs Commissioner Olli Rehn said they "stand by" Cyprus, according to a joint statement accompanying the IMF announcement. That statement said Cyprus has agreed to a "well-paced fiscal adjustment" that balances short-term and long-term needs.
Cyprus is the fifth eurozone nation to receive international aid in Europe's sovereign-debt crisis, which has entangled the finances of banks and nations in a mutually destructive spiral. The last 10 days of Cypriot rescue talks roiled markets as the country agreed to, then rejected, a plan to tax uninsured depositors before settling on the current deal.
Lagarde said yesterday that "importantly" the current deal means "insured depositors have been fully protected" representing 95 percent of account-holders in the country's two banks. Uninsured depositors at Bank of Cyprus Plc and Cyprus Popular Bank Pcl, which is being wound down, will absorb losses and Cyprus has imposed temporary limits on capital transfers.
The Cypriot rescue is a joint effort of the IMF, the European Commission and the European Central Bank.
The IMF announced a staff-level agreement with Cyprus on the 10 billion-euro program, hashed out with euro-area authorities on March 25. The deal calls for Cyprus to restructure its two largest banks, cut budget deficits and adjust its wage and pension systems.
"This is a challenging program that will require great efforts from the Cypriot population," Lagarde said in a statement. "We believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path toward a recovery."
Lagarde and European Union Economic and Monetary Affairs Commissioner Olli Rehn said they "stand by" Cyprus, according to a joint statement accompanying the IMF announcement. That statement said Cyprus has agreed to a "well-paced fiscal adjustment" that balances short-term and long-term needs.
Cyprus is the fifth eurozone nation to receive international aid in Europe's sovereign-debt crisis, which has entangled the finances of banks and nations in a mutually destructive spiral. The last 10 days of Cypriot rescue talks roiled markets as the country agreed to, then rejected, a plan to tax uninsured depositors before settling on the current deal.
Lagarde said yesterday that "importantly" the current deal means "insured depositors have been fully protected" representing 95 percent of account-holders in the country's two banks. Uninsured depositors at Bank of Cyprus Plc and Cyprus Popular Bank Pcl, which is being wound down, will absorb losses and Cyprus has imposed temporary limits on capital transfers.
The Cypriot rescue is a joint effort of the IMF, the European Commission and the European Central Bank.
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