NICOSIA, Cyprus (AP) — Cyprus' government briefed trade unions Friday on the contents of a bailout that the country is expected to agree with international creditors, in a deal that will make the country the fifth member of the group of 17 European Union nations that use the euro to receive international help with their debts.
Government spokesman Stefanos Stefanou says a deal with the European Commission, the European Central Bank and the International Monetary Fund is being finalized at European Union headquarters in Brussels where leaders are meeting to hammer out a budget agreement.
"The government is waiting for an announcement from Brussels regarding the memorandum," Stefanou said.
Cyprus, with a population of less than a million, sought international aid in June to save its banking sector from collapse after banks failed to replenish huge losses they suffered on bad Greek debt and loans.
The size of the bailout is estimated to range between €14-17.5 billion ($18-22.5 billion).
Most of that will go to recapitalizing banks, while around €7.5 billion will be channeled to refinancing the country's debt and to cover fiscal shortfalls over the deal's four-year implementation timetable.
Cyprus has been unable to borrow from international markets for over a year because of its junk credit rating.
Four other eurozone countries have received international help with their finances — Greece, Ireland and Portugal received a bailout to help manage their debts while Spain has been given a €100 billion loan facility to strengthen its banking sector.
In return for its bailout, Cyprus will have to commit to a range of spending cuts and tax increases. It is the terms of these austerity measures that the country and its international creditors have been thrashing out.
Stefanou said the left-wing government had negotiated hard to safeguard key workers' benefits and to help the economy rebound from a projected contraction next year of 3.5 percent of gross domestic product.
SEK trade union chief Nicos Moyseos said there are still concerns whether public and private sector wage rollbacks will "either save the economy or drive it deeper into recession."
Government workers' union boss Glafcos Hadjipetrou called public sector pay cuts of more than 15 percent for some employees "devastating" and "one-sided" but conceded Cyprus had little option but to negotiate a bailout with international lenders.
Cyprus' stock exchange rallied strongly on the expectation of a deal possibly later Friday. By midday, it was up 8.5 percent.
Unlike other bailed-out EU nations, the overriding sense in the country at news of an impending bailout agreement was one of relief that it would deliver a needed cash infusion to get the economy moving again.
Business leaders, as well as opposition parties, favored a bailout to end the prolonged uncertainty which has been choking investment and killing off business, while opinion polls showed most ordinary Cypriots supporting a deal despite cuts to salaries.