VIENNA, March 2 Striking a deal to bail out
Cyprus will be hard but an accord has to be negotiated by the
end of this month, a senior euro zone official said.
The remarks from Thomas Wieser, head of the Eurogroup
Working Group of senior officials who prepare decisions of euro
zone finance ministers, come just before Cyprus tops the agenda
at a Eurogroup meeting on Monday.
In an interview with Austrian broadcaster ORF aired on
Saturday, Wieser cited the danger that the euro zone's debt
crisis could flare up again.
"Why? We have a series of existing uncertainties. We have
Cyprus before us which will be difficult to resolve," he said.
"We have the uncertainty of how Italy will be governed and
how the financial markets could react. That of course has
possible contagion effect for other members states."
Cyprus's bailout request has been on hold for the past eight
months but euro zone officials have said they expect a
conclusion by the end of March.
"It's getting a bit tight," Wieser said. "The financing of
Cyprus is still secured for the coming weeks and months but we
have to come to a negotiating result in the course of March."
Pressed on how long Cyprus was safely funded, he said the
country "with some effort" had financing secured into May.
Scenarios have been floated in recent weeks over how Cyprus,
one of the euro zone's smallest economies, could ever afford to
repay a bailout bill which could reach 17 billion euros ($22.1
billion), almost the same size as its economy.
European policymakers have been split over how to handle a
bailout of Cyprus, with Germany and some other countries pushing
for bank depositors to bear part of the cost and many other
member states worried such a move will cause a bank run.
Cyprus's new finance minister on Friday ruled out a haircut,
or imposed losses, on bank deposits to ease a financial bailout
from international lenders, now stalled amid worries about debt
Wieser reiterated that Cyprus's steps to crack down on
suspected money laundering will be a precondition for any
outside aid but warned against blanket accusations that the
country was awash with dubious funds from Russia.
He said it was unfair to suggest all Russian money there was
suspect or to assume that other foreigners' funds in Cyprus were
On other subjects, Wieser said it might be possible to
adjust the timing for some aid recipients' fiscal consolidation
programmes but he did not name any countries.
"Perhaps one or the other country will get an additional
year to achieve the 3 percent (deficit) limit, but there is no
movement at all in the direction of saying deficits should not
be reduced but rather stay the same or even expanded," he said.