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Eurozone targets Cyprus bailout deal this month

BRUSSELS, March 05 (BSS/AFP) - Eurozone finance ministers said yesterday that a long-delayed bailout for Cyprus could be fixed by the end of the month after Nicosia agreed to submit its financial sector to independent scrutiny over concerns of large- scale money-laundering.

Long resisted by the previous, Communist-led Cypriot
government, the first face-to-face talks between the other 16
ministers from the euro currency area and their new Cyprus
counterpart, Michael Sarris, resulted in a deal to break an
eight-month deadlock.

The accord represented an "important step forward,"
according to European Union Economic Affairs and Euro
Commissioner Olli Rehn, and "the most convincing means of
effectively addressing persistent concerns" about the Cypriot
finance sector.

The anticipated 17-billion-euro ($22.3 billion) rescue
package for Cyprus is worth roughly the same amount as a year's
output for the Cypriot economy.

Cyprus was responding to a demand stressed by Germany in
particular, and with that issue resolved, the eurozone "agreed to
target political endorsement of the programme around the second
half of March."

Eurogroup chairman and Dutch Finance Minister Jeroen
Dijsselbloem hailed the outcome after barely four hours of talks
in Brussels, although he was light on details -- especially on
how a private company brought in from the outside could conclude
a detailed probe into dirty cash within just weeks.

"The new Cyprus government has only very recently been
installed," he underlined.

Expressing the hope that the EU-IMF Troika "can travel soon
to Nicosia and start the talks," he maintained: "March has only
just begun, so there is time yet."

Later on Monday evening, diplomatic sources confirmed to AFP
that talks were continuing between IMF managing director
Christine Lagarde, European Central Bank head Mario Draghi and
Dijsselbloem, joined by senior ministers from major eurozone
states, on how to accelerate the work.

Sarris was named by incoming Cyprus President Nicos
Anastasiades, who has vowed to save the near-bankrupt
Mediterranean island from financial meltdown with the "earliest
possible" bailout.

Eurozone ministers had put rescue negotiations on hold until
after last month's election.

As well as the money-laundering fears, doubts over debt
sustainability in the medium term and a programme of
privatisations demanded by the eurozone and IMF had also proved
sticking-points over recent months.

On debt sustainability, Anastasiades has already dismissed
any suggestion that investors or bank depositors should be forced
to take part of the burden directly, as some in Europe have

"Any reference to a 'haircut' on deposits or public debt is
not accepted," the president said recently, a point equally made
by Sallis.

On privatisation, the signals in the Cypriot media have been
less hostile than under the country's previous Communist

As with neighbouring Greece's repeated bailouts, the
position of Germany during a general election year is expected to
prove crucial for any accord on Cyprus.

Rehn had told German news weekly Spiegel on Sunday that
Cyprus might be forced to leave the eurozone if it did not get a
bailout, warning that "if Cyprus became bankrupt in a disorderly
way, the result would be almost certainly an exit from the

The Eurogroup also gave its strongest signal yet on Monday
that Ireland and Portugal, each of whom want debt maturities on
their bailouts extended to hasten their return to commercial
money markets, would likely find the terms of their rescues eased
once more.

Dijsselbloem said the issue would be run past non-euro EU
counterparts who join enlarged talks on Tuesday morning -- when
discussion is likely to be lively on planned bank bonus curbs
staunchly opposed by Britain -- and if agreement is reached
there, then new terms would be drawn up.

In another positive sign for the eurozone and an easing of
the debt crisis strains, Latvia earlier on Monday signed its
formal bid to join the currency area.

Prime Minister Valdis Dombrovskis inked the document at a
ceremony in Riga, paving the way for the Baltic state of two
million to become the 18th eurozone member in January 2014.