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Cyprus prepares for bailout exit

March 8, 2016

Eurozone ministers have lauded the country for its progress since taking on international emergency loans in 2013. Its close ties to the Greek economy helped push the island into trouble.

Deutschland EZB Euro Logo in Frankfurt
Image: Getty Images/AFP/D. Roland

Eurozone and international finance ministers praised Cyprus on Monday evening, as the country plans an early exit from a three-year "bailout" program set to expire on May 14.

Following the collapse of its banking sector, which had close ties to key ally Greece, the island nation negotiated a financial aid package in 2013 worth 10 billion euros ($13 billion at the time) with the "troika" of international creditors: the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB). After Cyprus was forced to restructure its two biggest banks in exchange for the financial lifeline, the government imposed capital controls that were lifted in 2015.

Now, the economy is projected to grow by 1.5 percent in 2016 for the second year in a row. Projections also suggest it will grow by 2 percent next year.

Exceeding expectations

EU Commissioner Valdis Dombrovskis pointed to the country's "consistent implementation of structural reforms" as the reason behind its improving situation, noting that Cyprus had exceeded all expectations in meeting its fiscal targets. Alluding to the modest growth forecasts for the next two years, however, Dombrovskis emphasized that it would take time before the coutnry saw major gains from the reforms.

Christine Lagarde
Lagarde praised the Country for its economic reformsImage: picture-alliance/AP Photo/R. Abd

IMF chief Christine Lagarde also praised the country in a statement. "I wish to congratulate the people and the Government of Cyprus on their accomplishments under the economic adjustment program, which has delivered an impressive turnaround of the economy during the past three years," she said.

Cyprus did fail to meet one of its creditors' demands: the privatization of its national telecommunications provider. Consequently, Nicosia will not receive its final bailout tranche.

The Eurogroup - made up of the finance ministers from eurozone countries - urged Cyprus to keep up with its reforms, including the implementation of new insolvency and foreclosure laws.

blc/msh (AFP, dpa, AP)