Legarde promises Cyprus €1bn rescue package

The International Monetary Fund will contribute about €1bn as part of a rescue programme for Cyprus that aims to stabilise the nation’s banks and reduce public spending, said Christine Lagarde, the IMF managing director.

The IMF yesterday announced the staff-level agreement with Cyprus on the €10bn programme, hashed out with eurozone authorities on Mar 25. The deal calls for Cyprus to restructure its two largest banks, reduce budget deficits and adjust its wage and pension systems.

“This is a challenging programme that will require great efforts from the Cypriot population,” Ms Lagarde said in a statement. “We believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path toward a recovery.”

Lagarde and EU economic and monetary affairs commissioner Olli Rehn said they “stand by” Cyprus, according to a joint statement. That statement said Cyprus has agreed to a “well-paced fiscal adjustment” that balances short- term and long-term needs.

Cypriot president Nicos Anastasiades swore in a new finance minister, the second of his six-week-old administration, after the government took more steps to ease banking restrictions in the island nation.

Haris Georgiades, 40, a graduate in economics from the University of Reading and a lawmaker with Anastasiades’s Disy party, was appointed the new finance chief at a ceremony in the capital of Nicosia. He succeeds Michael Sarris, a former banker, who resigned yesterday to aid a probe into the collapse of the country’s two biggest lenders.

Cyprus is the fifth eurozone country to receive international aid in Europe’s sovereign-debt crisis, which has entangled the finances of banks and nations in a mutually destructive spiral. The last 10 days of Cypriot rescue talks roiled markets as the country agreed to, then rejected, a plan to tax uninsured depositors before settling on the current deal.