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Cyprus

Troika thumbs up for next phase of bailout

A PERIODIC review of Cyprus’s bailout programme has been successfully concluded, the European Commission, European Central Bank and the IMF said on Wednesday, a key step for the country to take part in the ECB’s money printing programme.

“The main elements of these frameworks are now in place, which has allowed for the finalisation of the staff-level agreement,” the troika of international inspectors said in a statement, referring to an insolvency law.

The staff-level conclusion was subject to approval by the EU and IMF, which would be initiated shortly, the lenders said.

The conclusion of the review had been delayed because a law allowing banks to foreclose on mortgages had not been approved. That has since been signed off by parliament.

The conclusion of this review means that Cyprus can now qualify to participate in the ECB’s money printing programme to buy government bonds.

Officials have estimated that the ECB could purchase up to €500m in Cyprus sovereign debt under the €1.1trn ‘quantitative easing’ programme.

Of the €10bn in bailout aid agreed in 2013, Cyprus has to date tapped a little over €6bn. Officials say the island may not require the entire bailout amount because of a better than expected economic performance.

The statement added that further actions would be important to support the reduction of non-performing loans, including legislation to facilitate the sale of bank loans.

The troika also called on the authorities to “maintain the structural reform momentum”. The reform of the public sector administration is key in this respect, it pointed out.

“Timely implementation of the privatisation plan is necessary to increase economic efficiency, attract investment, and reduce public debt,” it stressed.

“Cyprus’ economic reform programme, which is supported by financial assistance from the European Stability Mechanism (ESM) and the IMF, aims to foster economic recovery and job creation by restoring financial sector stability, strengthening public finances, and implementing reforms to increase long-run growth.”

Conclusion of the reviews is subject to the approval process of both the EU and the IMF, which will be initiated shortly, the statement concluded.

The IMF’s executive board is expected to approve the report and disbursement of the next tranche on June 16.

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