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5 Mar, 2013 13:17

Cyprus agrees to bank audit ahead of bailout decision

Cyprus agrees to bank audit ahead of bailout decision

Cyprus has agreed to a European audit of its banks after allegations that the island state’s banking system might be used for money laundering.

The decision comes as a step towards getting financial aid from Europe to help prevent Cyprus’ economy from collapse. According to the Financial Times eurozone officials are insisting on an independent audit of Cypriot banks before any rescue is granted. 

On Monday seventeen eurozone finance ministers gathered in Brussels to resume talks on a €17 billion bailout for crisis-plagued Cyprus. The finance ministers pledged to agree a bailout for Cyprus by the end of March, Reuters reports. However details of the rescue plan have yet to be sorted out.

Cyprus’ reputation as a way point for controversial money flows and the government's close relationship with Russia has caused concern among potential helpers from the EU. The eurozone finance ministers clearly pointed out on Monday that Cyprus will not get any financial aid before it brings order to its banking system.

The new Cypriot Finance Minister Michalis Sarris said on Sunday that it is important to find a balance between a complete audit and maintaining banking secrecy.

Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of 17 EU states’ Finance Ministers said on Monday that “it’s important to find a good solution whereby we weigh these risks.”

He said private companies will conduct the audit of Cypriot banks. He also called on Cyprus to speed up working out a new economic development plan, which they are due to present before the EU and The International Monetary Fund.

Dutch Finance Minister and Eurozone President Jeroen Dijsselbloem (left) talks with Luxembourg Finance Minister Luc Frieden prior to an Eurozone meeting on March 4, 2013 at the EU Headquarters in Brussels. (AFP Photo / Georges Gobet)

The IMF is still not ready to approve the bailout according to Irish Finance Minister Michael Noonan. “The conditions are not yet in place for the board of the IMF to take a decision to participate," he said during the meeting in Brussels, Europe Online Magazine reports.

The troika of international lenders – the International Monetary Fund, the European Commission and the European Cental Bank  - will continue their review of Cyprus's sinking economy and will return to the island on Tuesday, ECB board member Joerg Asmussen said on Monday.

"A group of troika experts will travel to Cyprus tomorrow," Asmussen told reporters after a meeting of euro zone finance ministers. "It's a technical mission, and to get an understanding of the stance of the Cypriot government."

The grave condition of Cyprus’ economy caused by the recession in Greece and eurozone debt crisis forced the state’s previous government to request a bailout in June last year. However no agreement could be reached with the old communist-led government.

Talks on the foreign audit of Cypriot banks and aid for the Cyprus economy resumed after newly elected President Nicos Anastasiades announced last week he was committed to reforms, in exchange for a bailout loan from the EU and IMF.