Cyprus bailout

Peter Spiegel

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Cypriot finance minister Harris Georgiades, left, with eurogroup president Jeroen Dijsselbloem

And then there was one. If all goes according to plan, eurozone finance ministers will bid a fond farewell to the Cypriot bailout on Monday, making the island nation the fourth of the five countries that were forced into a rescue programme at the height of the crisis to exit. Only Greece remains.

In many respects, the Cypriots have been model bailout students. Nicosia only spent about €7.5bn of the €10bn originally allocated in the programme, and its economy returned to growth last year, a full year earlier than the bailout’s architects anticipated. Indeed, it has out-performed on almost every major economic indicator: its debt levels are lower than originally forecast, its projected budget deficit isn’t a deficit, and its current account is almost in balance.

Still, not everything is so rosy. Most importantly, the bailout will end without the Cypriot government completing all the reform tasks it was supposed to – the privatisation of the state telecommunications operator proved too politically radioactive so close to parliamentary elections, so won’t be done in time. As a result, Monday’s eurogroup meeting will be a farewell, but not a formal closure of the programme. That will happen at the end of the month when the three-year rescue just expires. Read more

Peter Spiegel

In a June letter, Anastasiades called Bank of Cyprus his country's "mega-systemic bank".

After the upheaval of March’s prolonged fight over Cyprus’s €10bn bailout, much of the ensuing debate has focused on the island’s largest remaining financial institution, the Bank of Cyprus, which was saved from shuttering but faces an uncertain future.

The bank’s fate was highlighted in a letter from Cyprus’s president to EU leaders in June, where he argued that eurogroup finance ministers had not properly dealt with the “urgent need” to address the “severe liquidity strain” the bailout had placed on the country’s last “mega-systemic bank”.

“I stress the systemic importance of BoC, not only in terms of the banking system but also for the entire economy,” Nicos Anastasiades wrote at the time.

Well, the European Commission’s soon-to-be-released first review of the Cyprus programme, a draft of which was obtained by Brussels Blog and posted here, shows that the fate of the bank is still somewhat unresolved – and that the EU has decided to make Nicosia’s promise to live up to the original bailout terms a primary condition for easing onerous capital controls which still hamper economic activity. Read more