Estonian govt approves draft Cyprus memorandum

Photo: SCANPIX

The Estonian government on Thursday discussed and in principle approved the draft of a memorandum of understanding to be concluded between the European Commission and Cyprus.

The aim of the Cyprus bailout package is to restore the soundness of the banking sector, put public finances in order and create conditions for sustainable economic growth and new jobs, the government's press service said.

The Cyprus aid decision is a significant precedent which shows that the European Stability Mechanism would in a hypothetical case of necessity apply to small nations like Estonia as well, Defense Minister Urmas Reinsalu who is deputizing for the prime minister said at the government's press conference.

"For us an important factor is that without the support program the developments there may become uncontrollable and Cyprus would be a source of instability also for other eurozone countries," Reinsalu added. "This loan is strictly conditional."

The overall amount of the rescue package is 10 billion euros of which the European Stability Mechanism will provide nine billion and the International Monetary Fund, one billion euros.

Cyprus applied to the eurozone for a bailout on June 25 last year. The talks with the Cypriot government reached the decisive phase in March and the main points of the aid program were agreed on March 24.

The bailout deal is to be finalized at Friday's meeting of eurozone finance ministers in Dublin. Thereafter the government will on Monday send the memorandum to parliament where the loan decision will be made pursuant to the act of the ratification and implementation of the Treaty Establishing the European Stability Mechanism.

"We'll submit the decision to parliament for endorsement as urgent business," Reinsalu said.