The Eurogroup welcomes the request of the Cypriot authorities for financial assistance
from euro area Member States in view of the challenges that Cyprus is facing, in
particular due to distress in the banking sector and the presence of macroeconomic
imbalances.
The Eurogroup acknowledges that an adjustment programme seems
warranted at this stage and considers responding favorably to it. The Eurogroup also
welcomes the request of Cyprus for financial assistance from the IMF, which in turn
would be considered in line with its internal procedures. Ministers invite the
Commission, in liaison with the ECB, and the Cypriot authorities and the IMF to agree
on a programme, including the financing needs, and take appropriate action to
safeguard financial stability, in light of the current very challenging external
environment and spill-over effects from sovereign market turbulence.
Based on a needs assessment, the euro area financial support would be provided in the
framework of a comprehensive adjustment programme, building on the measures
already taken by the Cypriot authorities and the recommendations put forward by the
European Commission on 30 May under the European Semester. The programme will
be negotiated by the Commission, in liaison with the ECB, with the Cypriot authorities
and the IMF. After an agreement has been reached with the Cypriot authorities, the
programme would be endorsed by the Eurogroup, in line with national procedures, on
the basis of an assessment by the Commission, in liaison with the ECB, and the IMF,
of the financing needs and the conditionality that shall accompany the assistance.
The Eurogroup is confident that the implementation of this programme would address
the financial, fiscal and structural challenges of the economy in a decisive manner and
should allow Cyprus to return to a sustainable growth path.
The programme will be based on:
- Ambitious measures to ensure the stability of the financial sector by addressing
expected capital shortfalls and preserving the soundness of financial institutions,
including restructuring and downsizing where needed.
- Determined action to carry out the fiscal adjustment to support the ongoing process
of fiscal consolidation.
- Structural reforms to support competitiveness and sustainable and balanced growth,
allowing for the unwinding of macroeconomic imbalances.
The financial assistance package shall be provided by the EFSF or the ESM on the
basis of its financing instruments. The Eurogroup looks forward to a swift response
from the IMF to the Cypriot request after having completed its required internal
procedures.
