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Wednesday, April 03, 2013

Details of Cypriot bailout agreement filtering through

The package is coming together. The IMF has officially announced that it will take part in the Cypriot bailout, providing €1bn of the total €10bn in loans - that gives a UK share of around €50m (see our thoughts here on UK IMF shares). That leaves €9bn to be provided by the eurozone, likely through the ESM. Below we breakdown the country shares (click to enlarge):

Other details of the Memorandum of Understanding (MoU) filtering through include:
  • 2.5% interest rate on the loan, with a 10 year grace period on repayments, it will then be repayable over a 12 year period (repayments start in 2023 and finish in 2035).
  • 4.5% in cuts/savings to be found before 2018 (on top of the 7% already scheduled by 2015) to drive Cyprus from a 2.4% primary deficit now to a 4% primary surplus in 2018 (two years later than previously envisaged).
  • The figures given in the MoU leaked yesterday (which reports suggest are the same in the final agreement) imply an 8% contraction in GDP this year and 3% next year. This seems optimistic and could be closer to 10% and 5% respectively, if not worse, but ultimately depends on how long the capital controls are in place for.
  • Eurozone officials will review the agreement tomorrow, with a final proposal to be presented on 9 April, which eurozone finance ministers are expected to approve at an informal Eurogroup meeting in Dublin on the 12 April.
  • The Bundestag could vote on the deal around the 15 April. IMF board expected to approve the deal in early May.
  • First tranche of bailout funds expected in early May, ahead of debt maturing at the start of June which Cyprus needs to pay off.
A few hurdles left to jump then in terms of approval from national parliaments – which is no mean feat given that the figures underpinning the bailout are likely to come under some well-deserved scrutiny.


Mike Hanlon said...

Is the Cypriot parliament going to get to vote on the deal, or just the Bundestag and others? If not, denial of democracy ought to be the biggest scandal of all.

Anonymous said...

Thank you to make clear to everybody that this bailout is still under DISCUSSION and to point out that it needs "to come under well-deserved scrutiny".
Here in Cyprus, there is just no way we can accept our economy to be deprived from its 2 main sectors, banking and tourism, because of this "rescue plan" which would only rescue Eurozone, not our country.
If this plan was never accepted by our government, it would mean that it would have betrade its people, wuth all consequences to expect...