IMF terms Cyprus rescue deal unique in nature

Friday, March 29, 2013
Gerry Rice, IMF Spokesman [PHOTO: UNifeed]
Washington: The International Monetary Fund (IMF) on Thursday said the agreement reached with this week to bail out Cyprus is unique, will be difficult, but it has the advantage of not excessively burdening the Cypriot taxpayer.

"So Cyprus was already facing a crisis situation. The agreement reached in Brussels deals with these challenges up-front. It focuses on dealing with the two problem banks and fully protecting insured deposits in all banks through a clear strategy that ensures the debt sustainability and does not excessively burden the Cypriot taxpayer," Gerry Rice, spokesman for the IMF, said.

An IMF team is currently in Cyprus trying to complete technical work on a program, which Rice said should be completed by early April. IMF staff are expected to submit the program for approval by the IMF Executive Board by the end of April.

On Thursday, Cypriot banks opened for the first time in two weeks with capital controls put in place to prevent a panicked withdrawal of deposits. The banks had been closed since March 16, when the Europeans presented their initial proposal for Cyprus, which was reworked over the weekend with a new agreement to close Cyprus Popular Bank, known as Laiki, and impose bigger losses on uninsured depositors.

"Now, the adjustment that the plan will entail as the financial sector downsizes and the economy adjusts accordingly will be a difficult process for the Cypriot people over some period of time. We are mindful of that, but it will ultimately result in an economic model that is more sustainable and growth promoting," Rice said.

He said the agreement has the full support of the European Central Bank, the European Commission and the IMF, known as the Troika.

"The agreement that was reached in Cyprus was an agreement that has the full support of the Cypriot authorities, the entire Eurogroup and the three institutions called the Troika," he said.

When asked if the program with Cyprus would be the new model for future agreements, Rice responded that the situation in Cyprus is unique.

"The case of Cyprus was very complex and unique in nature. It would be difficult to extend the case to the rest of Europe or to the world," he said.

During the briefing, the IMF also announced a new mission to Egypt for talks about a program potentially worth $4.8 billion.

"We are now expecting a staff team to travel to Egypt in the first days of April to continue to work with authorities on a possible financial arrangement," Rice said.
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