Germany Backs Cyprus Aid Tranche Release Following Troika Review

German Chancellor Angela Merkel’s government backs the release of the next installment of aid to Cyprus after the country’s international creditors confirmed that conditions of the transfer have been met.

“Against the background of the program implementation that has largely happened in the second quarter of 2013 and the confirmation of the implementation of prior actions by the troika, the federal government endorses the release of the next tranche to Cyprus,” German Deputy Finance Minister Steffen Kampeter said in a letter to the chairwoman of the Budget Committee in the lower house of parliament in Berlin.

The so-called troika said its assessment of Cypriot compliance for the second disbursement from the 10 billion-euro ($13.2 billion) package is “positive” overall, according to an implementation report obtained by Bloomberg News.

Cyprus secured the bailout in March in return for measures including a tax on bank deposits of more than 100,000 euros. Those concessions were demanded by creditors in a bid to shrink the country’s banking sector and have led to the Mediterranean island needing to impose capital controls as it wound down its second-biggest lender.

The Netherlands also supports the release of 1.5 billion-euro aid tranche, Dutch Finance Minister Jeroen Dijsselbloem, who is also chairman of the eurogroup, wrote in a letter to the Dutch parliament. Dijsselbloem said the Cypriot bailout agreement will be amended in light of the troika report.

The Cypriot economy, the third-smallest in the 17-nation euro region last year, will shrink a cumulative 13 percent this year and next, the country’s international creditors said on July 31

Bloomberg