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Troika discusses Cyprus bailout cost

24 July 2012 19:20 (UTC +04:00)

Baku-APA. Technocrats from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), collectively known as "troika", discussed with Cypriot officials on Tuesday over the island’s bailout cost, APA reports quoting Xinhua.

Cyprus requested EU and IMF bailout on June 25 to raise the money needed to recapitalize its two largest lenders, Bank of Cyprus and Popular Bank, after they failed to raise the money themselves.

There are widely differing estimates on the cost of the bank recapitalization. Cypriot authorities estimate the cost at 6 billion euros (about 7.3 billion U.S. dollars), double the amount originally announced.

However, the "troika" negotiators have put forward a preliminary estimate of 11 billion euros, as they insist that all loans, including those covered entirely by securities, should be taken into account, while in a separate estimate the ECB put the cost at 9 billion euros based on a different methodology.

"Troika" delegates were reported to be pushing for a bailout plan which involves reforming the public salary system, extending retirement age, introducing a general public health system and bringing the budget deficit down to 3 percent this year.

They also insisted on placing an extensive co-operative banking network under Central Bank supervision and possibly further raising Value Added Tax from its present 17 percent level.

Trade union officials who are due to meet the "troika" technocrats on Wednesday have expressed concern that they may ask for salary and pension cuts. They also warned against trying to abolish the cost of living allowance.

Government spokesman Stefanos Stefanou said there are what he called "red lines" which the government will not cross in its negotiations with the "troika."

"The ’troika’ will not play alone in the field as the government has got its own positions and sensitivities," Stefanou said, without specifying.

However it is known that the left-wing government strongly objects to extend retirement age and entirely abolish the cost of living allowance system.

Cyprus’ Finance Ministry said in a statement that the "troika" inspectors are aiming at completing this stage of negotiations on Friday.

They are expected to be back for a final round of talks, possibly in late August.