A Bank Run and a Tearful Agreement

Abstract

November 2012 was a tough month. The troika descended on Cyprus but the negotiations started falling apart. President Christofias and his labour minister were reluctant to accept the labour reforms. There was also disagreement over other reforms, ranging from the management of gas reserves to privatisation of the ports, telecommunications and electricity.

Appendix

Terms of Reference of the Eurogroup

We welcome the progress Cyprus has already been making in implementing some of the important measures about which the Troika and the Cypriot authorities are in agreement.

The due diligence exercise on the capital needs of the Cypriot financial sector has progressed. The findings are being reviewed by the Steering Committee. In line with established precedents, the final report is expected to be published as soon as the Memorandum of Understanding would be signed.

We are also assured that Cyprus ’s short-term financing needs are covered. On this basis, we consider that targeting agreement on a programme after the upcoming presidential elections in Cyprus would best facilitate national ownership. We expect therefore that final agreement on a programme could be reached as of March (my italics). It will also provide for a close monitoring of the Anti-Money Laundering and tax transparency frameworks and their implementation. We call on the Troika and the Cypriot authorities to make progress in the interim towards finalising the building blocks of the draft Memorandum of Understanding .

21 January 2013.