Cyprus opened on Friday a new round of negotiations with its potential creditors on a bailout that the crisis-hit country needs to support its ailing banks and services its debt payments.
Negotiators from the European Commission, the European Central Bank and the International Monetary Fund — collectively known as troika — held talks with senior government officials and bureaucrats from the finance ministry and the central bank.
Government spokesman Stefanos Stefanou said Friday's talks were limited to reviewing what has been discussed so far through long-distance teleconferencing and that negotiations will delve deeper as the talks progress.
"The assessment is that a lot of work has been done and progress has been made in the negotiations we've had with the troika so far and certainly, there's plenty of work that remains to be done," Stefanou told reporters after the meeting.
Talks are expected to carry on into next week, but a senior government official said earlier this week that it's unlikely a bailout deal would be signed after these negotiations and may have to wait for a later visit by the troika officials.
Cyprus sought financial aid in June to prop up banks that suffered huge losses on bad Greek debt and to pay its bills. The country has been unable to tap international markets since last year because of its junk credit rating, while a request to Russia for a loan has stalled. The government says it has enough cash to see it through the year's end, but wants a deal quickly.
"Our goal is to continue negotiations and whether we conclude in an agreement will become apparent as the talks progress," Stefanou said, repeating that the government remains focused on reaching a deal "as quickly as possible."
The government says it has essentially met a troika condition to slash around €1 billion ($1.27 billion) from the bloated public sector and generating revenue from tax hikes over three years. It is reluctant, however, to go agree to privatize profitable, state-owned companies, to put cooperative banks under centralized supervision and to do away with inflation-indexed pay rises.
The main hurdle to a deal is how much money the Cypriot banking sector — which has assets worth eight times the size of the country's €18 billion ($22.85 billion) economy — will need to recover. The Cypriot government says it'll need somewhere around €6 billion ($7.62 billion), while troika officials estimate it will be at least twice that.