European Union Economic and Monetary Affairs Olli Rehn admitted on Saturday that Cyprus was facing a damage limitation exercise after the disastrous escalation of its economic crisis over the last few days.
Rehn appeared hopeful that Nicosia, the eurozone and the International Monetary Fund were close to an agreement that would secure a bailout for the island nations.
“We recognise the progress now being made by the Cypriot government towards a solution which can pave the way for an agreement on a financial assistance programme for Cyprus,” said Rehn. “Intensive work and contacts will continue in the coming hours. “
Rehn said it was “essential” that a final agreement is reached on Sunday evening at an emergency Eurogroup meeting and then quickly implemented by all sides. Troubled Cypriot banks are due to open on Tuesday but Cypriot MPs approved on Friday the implementation of capital controls.
“Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available,” said Rehn. “Today, there are only hard choices left. Support from Europe can help to minimise the economic damage and protect the most vulnerable from the effects of the financial crisis in Cyprus.”
Rehn suggested that Cyprus faces huge challenges ahead to revive its economy after the damage that has been done to its vital financial sector.
“It is clear that the near future for Cyprus will be very difficult. But Cyprus and the Cypriot people are part of the European family. The European Union stands by them and will help to rebuild the Cypriot economy,” he said.