Eurogroup ready to rescue Cyprus

The eurozone is ready to bail out embattled Cyprus in coordination with the International Monetary Fund, finance ministers from the 17-nation single currency area said Wednesday. "The Eurogroup acknowledges that an adjustment programme seems warranted at this stage and considers responding favorably to it," the ministers said in a statement issued after a conference call. "The Eurogroup also welcomes the request of Cyprus for financial assistance from the IMF," it added. The conference call followed a formal request Monday for aid from Cyprus and comes on the eve of an EU summit aimed at stemming contagion in Europe's sovereign debt crisis, now in its third year. Financial assistance would be through the eurozone's rescue fund, the European Financial Stability Facility (EFSF), or its successor the European Stability Mechanism, which is to be set up next month. The next step will be for the European Commission, the European Central Bank, Cypriot authorities and the International Monetary Fund "to agree on a programme". This would set the amount needed by Cyprus as well as spell out the reforms it would need to carry out in return to put its financial house in order. Cyprus will be the fifth eurozone nation to have requested aid after Greece, Ireland, Portugal and Spain. The recession-hit island's banking system has been badly affected by the country's relatively large exposure to Greek debt. Already struggling to reduce a budget deficit that exceeds EU ceilings, the government is unable to borrow on international capital markets, with the three international ratings agencies having classified its bonds as junk. In Washington, IMF managing director Christine Lagarde said in a statement: "Today, the IMF received an invitation from the Cypriot authorities to participate in the external financial assistance to contain the risks to the Cypriot economy." "We stand ready to join the efforts of our European partners to help Cyprus return to stable and sustainable economic growth and restore a solid financial sector," Lagarde said. "We expect to send an IMF team to Cyprus to evaluate the situation in the field as soon as possible in preparation for discussions on an economic program that will help Cyprus meet the economic challenges it is facing." The Cyprus government has not said how much it was seeking, but local media speculated it would be in the region of five billion euros ($6.4 billion). Eurozone officials have said the figure could reach 10 billion euros, but Finance Minister Vassos Shiarly said the necessary amount had not been determined. The government said it is still seeking help from a third country, such as Russia, from which it secured a low-interest 2.5-billion-euro loan last year to cover refinancing needs for 2012.