Ireland and Portugal get more time
European Union finance ministers have agreed to grant Ireland and Portugal seven years more years to pay their bailout loans, easing the burden on their economies and paving the way for a quicker return to sustainable growth.
In their attempts to make progress to stabilise the economy of the 17 nations sharing the euro currency, the ministers, also approved a 10 billion euro (£8.5 billion) rescue loan package to stop Cyprus from sliding into bankruptcy.
But the rescue comes at a heavy price for the tiny Mediterranean island country. Cyprus, with an annual economic output of under 18 billion euro (£15.4 billion), must itself contribute 13 billion euro (£11 billion) to turn its economy around, levied through inflicting losses on holders of large bank deposits, tax increases and privatisations.
But there was only little progress made on the other plan EU officials have billed as vital in helping turn the tide in the bloc's three-year-old debt crisis - the setting-up of a full-fledged banking union. The 17 ministers endorsed the legal framework for a central authority for Europe's banks, which had been hammered out between government representatives and the European Parliament last month. It is set to take effect starting next year.
On the fundamental question of setting up a joint bank resolution mechanism and enabling Europe's bailout fund to directly recapitalise troubled banks, however, ministers reached no conclusion.
Olli Rehn, the EU's top economic official, insisted that "the timeline for establishing a banking union should be as short as possible". He added: "The banking union is not created and completed overnight, but we must have a clear perspective for the banking union, with a specific timeline."
Jeroen Dijsselbloem, who chairs the meetings of the Eurogroup of finance ministers, said he expected the bloc to reach agreement on the outstanding issues by June.
The decision to extend the loan repayment schedules for Ireland and Portugal proved uncontroversial and was expected to be backed by the finance ministers of all 27 EU ministers, who were meeting this afternoon in Dublin. Ireland holds the six-month rotating presidency of the European Union, and the ministers are meeting in historic Dublin Castle.
Mr Rehn welcomed the decision, but stressed both countries needed to stick to their programmes of fiscal consolidation and structural reforms, saying: "This is another very important step forward toward a sustained return to full market financing for both countries."
The rescue loan package for Cyprus, in turn, still needs parliamentary approval in several eurozone member nations. Those votes are expected to be finalised by the end of the month, with the first loan disbursement planned in May, Mr Dijsselbloem said.