NICOSIA, Cyprus — Officials from Cyprus' potential rescue creditors are on their way to the island nation to begin talks on the terms of a bailout, the country's finance ministry said Monday.
The ministry said in a statement that a large delegation from the so-called 'troika' — the body made up of the European Commission, the European Central Bank and the International Monetary Fund — will on Tuesday start three days of discussions with the Cypriot government and banking authorities, as well as political parties and trade unions.
It said the delegation will look into the country's banks, which are exposed to debt-stricken Greece, as well as the government's fiscal needs and long-term economic outlook.
The ministry said that Cypriot authorities will work closely with troika officials to assess the banking system's capital needs.
Ministry Finance Director Andreas Trokkos said this will be the first in a series of similar contacts and that a deal between the government and the 30-strong troika team on the bailout's terms may be ready to be signed by the end of the month.
Cyprus last week became the fifth country to ask its eurozone partners for financial aid to support its banks, which have suffered big losses as a result of their exposure to Greece. The banks also have sizeable private loan portfolios in crisis-hit Greece to the tune of €22 billion ($27.7 billion).
Cypriot officials have steadfastly refused to say how much they would ask, saying the amount will be calculated following talks with the troika delegation.
But the government needs at least €2.3 billion ($2.9 billion) to help recapitalize its top two commercial lenders, Bank of Cyprus and Cyprus Popular Bank. Most of that money will go to Cyprus Popular which is the most exposed to Greece.
The Finance Ministry said on Monday that the government has acquired €1.797 billion ($2.26 billion) worth of shares in Cyprus Popular Bank. That's about €3 million short of the amount that the government had underwritten last month in a bid to help the bank raise the money privately.
"The government of Cyprus remains firmly committed to ensuring the stability of the financial sector," a finance ministry statement said.
Cypriot government officials have expressed hope that the island would avoid the kind of harsh austerity measures that other bailed-out countries including Greece, Portugal and Ireland have had to endure in exchange for the financial aid.
The government is keen to protect its 10 percent corporate tax rate which accounts for much of the tax revenue flowing into state coffers.Comment on this story
"It's very important that the country that will implement the (bailout) program must accept it as its own," Trokkos told reporters. "If the country doesn't believe in the measures, then they possibly won't be faithfully implemented and there won't be the desired results."
Meanwhile, Cyprus is continuing to sound out both Russia and China for a bilateral loan. The country, which cannot borrow from international markets because of its junk credit rating, is surviving on a €2.5 billion low-interest Russian loan, but that money is expected to run out by the end of the year.