Cyprus must follow reforms: Merkel

11th January 2013, Comments 0 comments

German Chancellor Angela Merkel urged Cyprus on Friday to follow economic reforms, two days after saying the eurozone bailout candidate will not see any special terms as it seeks an aid package.

Merkel, who is attending an extraordinary summit of the centre-right European People's Party in the port city of Limassol, also said the reportedly 17 billion euro ($22 billion) bailout package will not be "decided now."

"We are here today to study the situation of Cyprus and the situation in other European countries," Merkel, speaking in German, told reporters before attending the summit.

"I will say to Cyprus that the task will be such that on one side it must follow reforms and on the other side there has to be solidarity from other European countries."

Merkel did not clarify what reforms Cyprus must undertake, but the island has already pushed through tough austerity measures to meet the demands of eurozone creditors for more than one billion euros in cuts and savings.

Merkel also said that a package being hammered out in talks between Cyprus and the "troika" of the European Commission, the European Central Bank and the International Monetary Fund "are not at the stage to decide now."

Her remarks echoed those made on Wednesday, when she said there would be no exceptional terms for Cyprus and that talks are likely to continue for some time.

"There are no special conditions for Cyprus... We have generally accepted rules in Europe and we are a long way from finishing the negotiations," she said.

Meanwhile, Moody's downgraded Cyprus's government bond rating by three notches from B3 to Caa3 on Thursday, citing the anticipated increase in the government's debt burden.

The downgrade to middle-range junk bond status was driven by the further increase in the amount of government support Cypriot banks are likely to require. Cyprus's banks face rising delinquencies on loans to Greek and Cypriot customers.

Thursday's downgrade is the latest by a major ratings agency of debt-plagued Cyprus.


© 2013 AFP

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