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| Euro Zone Strives for Breakthrough in Bailout Package for Cyprus | |
| (about 1 hour later) | |
| BRUSSELS — Finance ministers from euro area countries met here on Friday as a showdown loomed with the International Monetary Fund over the size of a rescue deal for Cyprus seen as critical to the stability of the single currency. | BRUSSELS — Finance ministers from euro area countries met here on Friday as a showdown loomed with the International Monetary Fund over the size of a rescue deal for Cyprus seen as critical to the stability of the single currency. |
| The talks could stretch into the weekend, with finance ministers expected to seek to limit the overall costs of the rescue plan. Christine Lagarde, the president of the I.M.F., is expected to push for a deal that is generous enough to enable Cyprus eventually to pay the money back. | The talks could stretch into the weekend, with finance ministers expected to seek to limit the overall costs of the rescue plan. Christine Lagarde, the president of the I.M.F., is expected to push for a deal that is generous enough to enable Cyprus eventually to pay the money back. |
| The Cypriot authorities want a plan that ensures that the island remains attractive to investors, who include many Russians with large deposits in the country’s banks. | The Cypriot authorities want a plan that ensures that the island remains attractive to investors, who include many Russians with large deposits in the country’s banks. |
| Ms. Lagarde was blunt about the need for ministers to agree to a realistic package of measures. “All I know is that we don’t want a Band-Aid,” she said. “We want something that lasts, something that is durable and that will be sustainable.” | Ms. Lagarde was blunt about the need for ministers to agree to a realistic package of measures. “All I know is that we don’t want a Band-Aid,” she said. “We want something that lasts, something that is durable and that will be sustainable.” |
| The key to a breakthrough is finding a way to bring down the size of any bailout package, estimated at 17 billion euros ($22.2 billion). The amount is small compared with the rescue deal for Greece, but would represent almost as much as Cyprus’s gross domestic product, which is about 18 billion euros. | The key to a breakthrough is finding a way to bring down the size of any bailout package, estimated at 17 billion euros ($22.2 billion). The amount is small compared with the rescue deal for Greece, but would represent almost as much as Cyprus’s gross domestic product, which is about 18 billion euros. |
| European governments and the I.M.F. were expected to structure a bailout so that creditors including the European Central Bank reached a deal closer to 10 billion to 13 billion euros. | European governments and the I.M.F. were expected to structure a bailout so that creditors including the European Central Bank reached a deal closer to 10 billion to 13 billion euros. |
| Jeroen Dijsselbloem, the president of the Eurogroup, which gathers finance ministers from countries in the euro zone, refused to speculate about the size of the deal. | Jeroen Dijsselbloem, the president of the Eurogroup, which gathers finance ministers from countries in the euro zone, refused to speculate about the size of the deal. |
| “I know what my main goals are,” Mr. Dijsselbloem said, adding that they were to make “sure that there is stability in the euro zone and that there is a new sustainable growth path possible for Cyprus.” | “I know what my main goals are,” Mr. Dijsselbloem said, adding that they were to make “sure that there is stability in the euro zone and that there is a new sustainable growth path possible for Cyprus.” |
| The most contentious issue is whether to force Cypriot depositors to take losses — perhaps in the form of a one-off tax on their holdings — in order to make the country’s debt more manageable. The Cypriot authorities have condemned any such initiatives on the grounds that they would do lasting damage to their financial services sector. | The most contentious issue is whether to force Cypriot depositors to take losses — perhaps in the form of a one-off tax on their holdings — in order to make the country’s debt more manageable. The Cypriot authorities have condemned any such initiatives on the grounds that they would do lasting damage to their financial services sector. |
| The other elements of a deal could involve Cyprus raising its low corporate tax rate, privatizing state assets and overhauling its banks to ensure that they are not havens for money laundering. Another factor is whether Russia will agree to lower the interest rate on a loan worth 2.5 billion euros it has already made to Cyprus. | The other elements of a deal could involve Cyprus raising its low corporate tax rate, privatizing state assets and overhauling its banks to ensure that they are not havens for money laundering. Another factor is whether Russia will agree to lower the interest rate on a loan worth 2.5 billion euros it has already made to Cyprus. |
| Mujtaba Rahman, a senior analyst with the Eurasia Group, a political risk research and consulting firm, said it was likely that countries like Germany and Finland would ultimately reach a deal with the I.M.F. | Mujtaba Rahman, a senior analyst with the Eurasia Group, a political risk research and consulting firm, said it was likely that countries like Germany and Finland would ultimately reach a deal with the I.M.F. |
| “The fact is that some governments in the north of Europe need the I.M.F. also to be contributing money to Cyprus in order to convince their parliaments to give approval to a deal,” Mr. Rahman said. | “The fact is that some governments in the north of Europe need the I.M.F. also to be contributing money to Cyprus in order to convince their parliaments to give approval to a deal,” Mr. Rahman said. |
| The ferocious debate over how much pressure to put on euro area countries in difficulty stepped up a notch on Friday after it emerged that Mario Monti, the departing prime minister of Italy, suggested that the demands placed on him to tighten his country’s finances had been unfair. | The ferocious debate over how much pressure to put on euro area countries in difficulty stepped up a notch on Friday after it emerged that Mario Monti, the departing prime minister of Italy, suggested that the demands placed on him to tighten his country’s finances had been unfair. |
| In a letter sent Thursday to other European Union leaders at the start of a two-day summit meeting here on the economy, Mr. Monti wrote that Italy “has been delivering on all the policy objectives” set out by the union. But, in a thinly veiled reference to Spain, Portugal and Greece, he wrote that other countries “have been given extra time to reach their budgetary objectives.” | In a letter sent Thursday to other European Union leaders at the start of a two-day summit meeting here on the economy, Mr. Monti wrote that Italy “has been delivering on all the policy objectives” set out by the union. But, in a thinly veiled reference to Spain, Portugal and Greece, he wrote that other countries “have been given extra time to reach their budgetary objectives.” |
This article has been revised to reflect the following correction: | |
| Correction: March 15, 2013 | |
Because of an editing error, a headline on an earlier version of this article misspelled the name of the country in talks to receive a bailout. It is Cyprus, not Cypress. |