BERLIN (Reuters) - Euro zone finance ministers will not be rushed into a decision about a bailout for Cyprus when they meet in Brussels on Monday, German Finance Minister Wolfgang Schaeuble was quoted as saying in a newspaper interview.
“In the Eurogroup (meeting of finance ministers) we will decide without rushing. Cyprus’s problem is not easy to solve,” he said according to an advance copy of an article due to be published in German newspaper Tagesspiegel on Sunday.
“Cypriot banks are completely oversized in relation to the country’s gross domestic product. This situation cannot continue. That’s where the problem needs to start being tackled,” he said.
Cyprus needs 8-10 billion euros to recapitalize its banks and 7 billion to repay loans and finance government operations. Such a rescue would increase the island’s debts to around 145 percent of GDP, a level considered unsustainable.
Thomas Wieser, head of the Eurogroup Working Group of senior officials who prepare decisions of euro zone finance ministers, said on Saturday striking a deal to bail out Cyprus would be hard but an accord had to be negotiated by the end of this month.
Earlier this week Schaeuble and his French counterpart Pierre Moscovici issued a joint statement in which they welcomed the outcome of Cyprus’s presidential election on Sunday, said talks must begin soon on an international bailout and urged a deal by the end of March.
Schaeuble said the Eurogroup, which is due to discuss a bailout for Cyprus on Monday, would find an “appropriate solution” for the island and added that while the path ahead would be neither easy nor painless, it would lead to success.
He said the Eurogroup was in close dialogue with Russia which he said was interested in a solution to Cyprus’s problems as it is one of the country’s creditors and a significant amount of deposits in the island’s bank are from Russian investors.
Asked if Cyprus was systemically relevant for Europe, Schaeuble said: “The ESM (European Stability Mechanism) Treaty requires a clear and resilient justification as a prerequisite for giving aid to a country. We are waiting for that.”
“But there are arguments in favor of classifying Cyprus as systemically relevant,” he added.
Klaus Regling, head of the ESM, told a German magazine on Saturday that deep reservations in some European states about using the euro zone’s bailout fund for bank recapitalization could ultimately mean the plan is abandoned.
Schaeuble praised the pace of reforms in crisis-stricken Greece and said Ireland and Portugal were on the right path even if they hadn’t been able to return to the markets for good.
He called on Italian politicians to form a government quickly after a vote earlier this week left no party with a workable majority to.
In comments that echoed those he made in a Reuters interview earlier this week, Schaeuble said the euro zone crisis was not over yet and while the 17-nation bloc was “on the right path” and had made “great progress”, there could be setbacks ahead.
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Reporting by Michelle Martin; editing by Ron Askew