Cyprus : new external audit from banks.

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CYPRUS

The “Troïka” of donners had begun Tuesday a week of economic audit in Cyprus.

The island has to respect a strict rescue plan after bankruptcy. It has restructure its major banks and commit to drastic budget cuts and privatizations.

With the bankruptcy due to the exposure of its banks to Greek debt, Cyprus received a loan in March of 10 billion euros from the Troika. The donners was  the European Central Bank, the European Commission and the international Monetary Fund. After an initial audit in July, the Troika noticed “good progress”  with these measures and authorized the payment of a new tranche of the loan.

However, this new review, which opens Tuesday with interviews with the Minister of Finance Haris Georgiades and Governor of the Central Bank Panicos Demetriades could be trickier. The Cypriot government must now provide guarantees of its intention to reform the civil service and privatization of telecommunications companies and electricity issues. Mr. Georgiades stays optimistic before the new hearing, stressing the budgetary efforts the island has already adopted.

However, the outlook remains bleak for Cyprus, whose budget projections forecast a contraction of the economy by 3.9% in 2014 after an expected drop of 8.7% this year.

Sandie Vadimon, IEJ 3F

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