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While Cyprus is facing a difficult time, reaching agreement on the principles of the program of support is a good sign, Estonia's Finance Minister Jürgen Ligi said on Monday.
Estonian finmin calls agreement on Cyprus package a good sign
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"The aim of the future program is to restore the sustainability of public finances and ensure economic growth through putting the financial sector in order. It is logical that also the financial sector will make its contribution to recovery, because instability of Cyprus has largely arisen from the size of it [financial sector]," Ligi said in a press release published by the ministry.
The eurogroup on Monday morning reached an agreement with the Cypriot authorities on the key elements necessary for a future macroeconomic adjustment program. The share of euro area countries in the future program is up to 10 billion euros and the money will be lent by the European Stability Mechanism (ESM). The prerequisite for the loan is a cooperation memorandum that is to be laid down by Cyprus and the troika by the beginning of April. In Estonia the terms of the loan must be approved by the Riigikogu.
The program would be implemented using the usual procedure where disbursements are preceded be a review of Cyprus's abidance by the agreed terms.
Under the agreement, the financial sector of Cyprus will be restructured to restore its viability. The planned measures will safeguard all deposits below 100,000 euros in accordance with EU principles.
There will be an appropriate downsizing of the financial sector, with the domestic banking sector reaching the EU average by 2018. In addition, the Cypriot authorities have reaffirmed their commitment to step up efforts in the areas of fiscal consolidation, structural reforms and privatization.
An independent evaluation will be carried out of the implementation of the anti-money laundering framework in Cypriot financial institutions, involving Moneyval alongside a private international audit firm.
The program agreed in principle between the eurogroup and Cyprus is backed by the troika, or the Commission, the International Monetary Fund (IMF), and the European Central Bank (ECB).