Eurozone ministers – meeting in Dublin – have given their backing to a 10 billion euro bailout plan for Cyprus.
But they will not lend any more money to Nicosia which will have to come up with 13 billion euros to cover its financing needs and restructure its banks.
The ministerial support means countries like Germany and Finland can seek approval for the bailout in their national parliaments.
EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference: “I want to welcome today the political agreement, reached on the memorandum of understanding for the Cyprus programme. And I hope it will be possible to satisfactorily complete this procedure by end of next week.”
As part of the bailout, Cyprus will have to raise taxes, cut spending and implement structural reforms to improve its public finances and to be able to eventually repay the debt.
Separately the ministers agreed to give Ireland and Portugal up to seven more years to pay back their bailout loans:
Eurogroup President Jeroen Dijsselbloem explained: “The Troika and the EFSF have proposed to increase the maximum average maturities of the loans by seven years in order to smooth the redemption humps and reduce the refinancing needs of both countries.”
Their support for extending Portugal’s loan maturities is conditional on Lisbon finding new ways to meet its budget targets for this year.
They were thrown into doubt by a constitutional court’s ruling that rejected some earlier planned savings measures.
The EU will also try to help revive growth in Cyprus, by underwriting projects using structural funds.