Eurozone meets tomorrow to try to seal Cyprus bailout

The eurozone’s 17 finance ministers will meet in Brussels tomorrow after an EU leaders’ summit today to discuss a financial bailout of Cyprus, officials said yesterday, signalling growing momentum for a deal.

The meeting, which will come both after the summit and a mission by the troika of international lenders to Cyprus, raises expectations that the eurozone is close to sealing a package of aid that the island asked for last June.

“Friday 5pm extra Eurogroup on Cyprus,” Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings, said on his official Twitter feed.

Crippled by its exposure to Greece, Cyprus needs funds from the eurozone to recapitalise its banks and to finance the government over the next three years.

Without help, the Mediterranean island would slide into default, risking the eurozone’s credibility and threatening progress made last year in convincing investors that the bloc will not be overwhelmed by its debt problems.

Initial estimates on the size of the bailout went as far as the whole Cypriot economy produces in a year – some €17 billion – raising doubts whether the eurozone member state would ever be able to pay back the money.But officials told Reuters late on Tuesday that Cyprus may require a smaller bailout than that because it could raise money from a levy on deposits and other taxes.

The international troika of lenders, the European Commission, the European Central Bank and the International Monetary Fund, have been in Cyprus and told eurozone finance ministers enough progress had been made in Nicosia to hold the Eurogroup meeting in Brussels, officials said.

The lenders are also discussing the possibility of Cyprus raising its corporate tax by 2.5 points to 12.5 per cent. The lenders would even like to see Cyprus introduce a financial transaction tax, something the country opposes.

Eurozone officials have said they expected a decision on a bailout for the island to be taken as early as before the end of March.

German Finance Minister Wolfgang Schaeuble told conservative politicians on Tuesday that Germany’s Bundestag lower house of parliament would vote on aid for Cyprus before a wider European decision, but he did not set a date.