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Cyprus

ESM’s Regling asks banks to go hard on NPLs, reduce branches (Update)

Klaus Regling

(Updates with Regling comment in first paragraph and finance minister comment in third paragraph)

By Stelios Orphanides

Head of the European Stability Mechanism Klaus Regling said that the mandate of the European Union’s bailout fund does not allow for the financing of a settlement of the Cyprus Problem, the Cyprus News Agency reported.

“At the moment that would not be possible without changing the ESM Treaty,” he was quoted as commenting to reporters in Nicosia on Tuesday after meeting President Nicos Anastasiades.

Finance minister Harris Georgiades, who was accompanying Regling, said that euro area finance ministers will discuss on Monday the financial parameters of a settlement of the Cyprus Problem and reiterated the government’s commitment to structural reforms and fiscal consolidation.

Regling, the ESM’s managing director, said that while parameters concerning the financing of Cyprus’s reunification, including compensating property owners, remain unknown, the potential for the post-solution economy is huge in the long-term.

Cyprus received more than €6.2bn in financing from the ESM to cover its fiscal deficit and recapitalise the cooperative banking sector over the 2013-2016 period, when Cyprus entered an adjustment programme.

“I think it is fair to say that Cyprus is reaping the benefits of the three-year adjustment programme that was linked to the ESM and International Monetary Fund programme,” he said. “Good progress in many-many areas. Growth has come back; unemployment is coming down and I am confident (that) that will continue”.

Earlier, on Tuesday, while addressing delegates at a conference, Regling encouraged Cyprus to go harder on non-performing loans, which account for roughly half of the Cypriot bank’s loan portfolio. In addition, he said Cypriot banks should reduce the size of their branch network.

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