Revision of Cypriot bailout terms unlikely, euro zone officials say

The euro zone does not intend to change the terms of Cyprus's bailout as requested by Cypriot president Nicos Anastasiades in a letter sent to euro zone leaders and its lenders, three senior euro zone officials said today.

Cyprus secured €10 billion in emergency loans from the euro zone's bailout fund in April to avoid bankruptcy. The deal involved the closure of the island's second biggest bank, Laiki, and a fundamental restructuring of Bank of Cyprus.

In the letter, Mr Anastasiades did not explicitly ask for more money but indicated that the Cypriot economy could not cope unless the terms of the rescue package are altered.

“It is my humble submission that the bail-in was implemented without careful preparation,” Mr Anastasiades says in the letter, which the Financial Times and Wall Street Journal reported yesterday.

“The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus‘s turn to seek help.”

But EU officials said there was no intention to alter the terms of the loans agreed with Cyprus or to supply more funds. The sources suggested Mr Anastasiades was aware no revision was likely, but wanted to send a message to a domestic audience.

Asked if the terms of the bailout could be changed, one senior EU policymaker said: “No, not as far as I can see.”

Euro zone finance ministers will discuss the letter at a meeting in Luxembourg tomorrow.

A second official said: “There’s no chance we‘ll revise the terms of the bailout, but we’ll discuss it on Thursday.”

A third confirmed no change was possible in the short-term, but said there could "potentially" be adjustments in the medium term, as was the case of Greece. However, that also depends on euro zone leaders, who will meet on June 27th-28th.

It is the second time Mr Anastasiades has voiced dissatisfaction with the terms of the bailout, which his government negotiated only weeks after being elected.

In early April Mr Anastasiades told reporters in Nicosia he would ask European Commission president Jose Manuel Barroso and European Council president Herman Van Rompuy for extra assistance given the bad economic situation of the island.

EU officials clarified later that the discussion concerned the early use of EU structural funds, money from the EU budget to help development in member states, allotted to Cyprus in the next seven-year budget to help boost growth.

Reuters