Finance ministers discussing Cyprus bailout

Updated: Saturday, 16 Mar 2013 10:10

Eurozone finance ministers are locked in talks in Brussels tonight in an attempt to agree on a bailout package for Cyprus, which is expected to total around €10bn.

International Monetary Fund Managing Director Christine Lagarde and European Central Bank President Mario Draghi are also attending.

Chairman of the talks, Jeroen Dijsselbloem, said ministers would "see how far we will get".

Minster for Finance Michael Noonan said he would be disappointed if they were not able to reach an agreement on the scope of the bailout tonight.

One EU source told RTÉ News that the ministers would push hard for a deal tonight.

The negotiations are complicated by that fact that Russia will also be involved in the arrangement, due to its extensive ties to Cypriot banks.

It had been expected that Cyprus would try to secure a bailout of around €17bn, but it is understood that ministers believe this would push its debt to an unsustainable level.

It is reported that one idea under consideration is that the funding gap could be filled by imposing taxes on Cypriot bank depositors.

The bailout package will make tough demands on the Cypriot government, including tax increases, raising its nominal corporate tax rate, selling off state assets, and an overhauling the banking sector;

The main reason Cyprus requires a bailout is due to the fact that it was heavily exposed to Greek debt.

One major question hanging over the discussions is whether the IMF will contribute funds to the Cypriot bailout or just offer technical advice and act as a supervisor.

Mr Noonan earlier said the ministers would be briefed by representatives of the European Commission, ECB and the IMF on their assessment of Cyprus.

Asked if Cypriot bondholders or depositors in Cypriot banks could be forced to accept losses, Mr Noonan said he was unsure, but added: "If it's in the media regularly, there must have been some degree of discussion about it."