European Union leaders will meet for a March 14-15 summit in Brussels to discuss terms for Cyprus, including the island nation's debt sustainability and possibly imposing losses on depositors.
The European Central Bank’s pledge to intervene in bond markets and the prospect of an economic recovery by the end of the year are holding the three-year-old sovereign debt crisis in check. Still, gridlock in Italy has raised the specter of renewed turmoil in the euro area’s third-largest economy, while growth has ground to a halt in France, the second-largest.
Nicos Anastasiades, who took over as Cyprus’s president on February 28, will attend his first EU summit meeting this week. He said proposals to impose losses on depositors as part of a bailout package are “out of the question".
A bailout for Cyprus, which would be the fifth rescue for a euro nation since the crisis began in 2009, may involve a debt target of 100 per cent of gross domestic product in 2020, according to three EU officials who spoke on condition of anonymity. Cyprus said in January that a rescue could push its debt-to-GDP ratio to a peak of just under 140 per cent in 2014.
IMF Managing Director Christine Lagarde has said any plan for Cyprus should address debt sustainability in addition to offering the country a path back to markets and economic growth. The IMF and European leaders struggled last year to overcome similar differences over a rescue package for Greece.
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