* Debt levels in focus as Cyprus talks to troika
* Island's speculated bailout figure huge
* Work still needed in talks-govt
* Privatisations, wages a sore point
By Michele Kambas
NICOSIA, Nov 9 Cyprus launched a last-ditch bid
with potential lenders on Friday to get financial aid needed
before coffers in the tiny euro zone economy start running dry.
Battered by its exposure to debt-crippled Greece, Cyprus
sought a full bailout from the EU and the IMF in June to buffer
its banks and plug widening deficits after attempts to secure a
credit line from Russia failed.
The government has said it could have difficulties paying
salaries in December. It is currently heavily reliant on
short-term financing from domestic banks.
Economists from the European Central Bank, the International
Monetary Fund and the European Commission, known as the
"troika", arrived for talks at the finance ministry on Friday
morning. They did not speak to journalists.
"A great deal of work has been done, there has been progress
in the negotiations with the troika until now," said Stefanos
Stefanou, the Cypriot government spokesman and a member of
Cyprus's negotiation team, referring to previous consultations
with the group. "Obviously though a lot of work remains to be
The size of the potential bailout -- speculated to be
anything between 11 and 16 billion euros and the bulk of it for
banks -- will be huge in proportion to the 17.9 billion euro
economy, the third smallest in the euro zone.
Debate on how Cyprus will manage to pay it back will feature
prominently in discussions. Cyprus says it wants the euro zone's
ESM bailout fund to recapitalise the banks directly, but
heavyweights in the bloc disagree with the ESM undertaking
"Economically the biggest challenge of these talks will be
how to get a deal which make the debt sustainable," said
economist Fiona Mullen at Sapienta Economics.
The IMF, which announced its participation in the mission on
Wednesday, hinted as much: It said it wanted a 'financing
solution consistent with debt sustainability'.
Cyprus is already staring at a public debt which catapulted
from 71 percent of GDP in 2011 to about 90 percent this year
after coming to the aid of its second largest bank, Popular
Lenders want privatisations, wage cuts in a public sector
which is one of the most highly paid in Europe, a culling of
wage indexation and the creation of a "bad bank" to park soured
Cyprus says it will not privatise "profitable" state
enterprises and its leftist President Demetris Christofias says
he is prepared to take to the streets to defend wage indexation.
Friday's talks were open ended, but it was unlikely that a
deal was imminent, a senior Cypriot official said on condition