Cyprus Gets First Aid Tranche as Greece Cash Backed

By Corina Ruhe and Karl Stagno Navarra - May 13, 2013

Bloomberg

Cyprus received its first emergency aid payment and Greece won approval of 7.5 billion euros ($9.7 billion) of rescue loans.

Cyprus received 2 billion euros today and will get as much as 1 billion euros more in June as the Mediterranean island’s 10 billion-euro aid package was activated, the European Stability Mechanism, the euro area’s permanent backstop fund, said in a statement.

The release came as finance ministers from the 17 euro countries wrangled over banking policy and economic remedies to the fallout from the financial crisis that emerged in Greece in 2009. They also gave the green light to two fresh aid payments for Greece.

“We’ve shown over the past three years that the general direction to overcome the confidence in the euro is right,” German Finance Minister Wolfgang Schaeuble told reporters. “We still have slower growth in Europe, and we have to see to it that we reduce unemployment even with limited growth rates.”

Austerity Rethink

Europe’s governments are in the midst of a policy rethink after three years of budget cutting as they face up to a deepening recession in the euro area and a record unemployment rate that exceeds 12 percent. Still in doubt for economists is what kind of stimulus will actually be delivered and what effect it could have in the crisis-torn currency bloc.

The Greek aid includes 4.2 billion euros that should get approval from the European Financial Stability Facility in coming days. A second payment of 3.3 billion euros in June is contingent on Greece meeting performance milestones.

The euro-area finance ministers said they welcomed Greece’s “important measures” on “strengthening the organization and effectiveness of the revenue administration” and steps to “fully recapitalize Greek core banks and to consolidate the banking system.” Still, “strong resolve will be needed in the establishment of the new organizational structure and the fight against tax evasion” and “further work is needed to fully implement the entire list of prior actions,” according to a statement.

To contact the reporters on this story: Corina Ruhe in Brussels at cruhe@bloomberg.net; Karl Stagno Navarra in Brussels at ksnavarra@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net