Cyprus on Tuesday agreed on the terms of its 10-billion-euro bailout with the troika as the country’s Finance Minister Michalis Sarris stepped down pending an investigation into the running of Cyprus Popular Bank (Laiki), where he was previously the CEO.
Government Spokesman Christos Stylianides announced that a memorandum had been agreed with the European Commission, European Central Bank and International Monetary Fund.
“This is an important development, which brings a long period of uncertainty,” he said.
Cyprus expects to receive its first bailout tranche in early May. Nicosia will be charged an interest rate of 2.5 percent for its loans but will receive a 10-year grace period on repayments.
In return, Cyprus has agreed to a range of fiscal measures and reforms that include the corporate tax rate rising from 10 to 12.5 percent, 4,500 civil servants leaving the public sector by 2018 and 170,000 Cypriots paying a temporary insurance fee of 1.5 percent on monthly salaries for access to healthcare.
Stylianides said Cyprus will retain “exclusive responsibility” for the exploitation and management of natural gas revenues as part of the agreement.
The memorandum foresees Cyprus running a primary deficit until 2016 and a primary surplus of 4 percent of GDP from 2017 onward.
Sarris’s departure from the Finance Ministry was expected as due to an investigation into practices at Cypriot banks. It is also thought President Nicos Anastasiades lost confidence in Sarris. Labor Minister Harris Georgiades was named as his replacement.