Cyprus must deal with bad loans, says head of euro zone bailout fund

BRUSSELS (Reuters) - Cyprus still needs to deal with a high proportion of bad loans at its banks, but otherwise the economic restructuring after its international bailout has been a success, the head of the euro zone bailout fund said on Wednesday.

Cyprus will exit the 10 billion-euro, three-year bailout agreement at the end of March, having used only 70 percent of the available money, said Klaus Regling, the head of the European Stability Fund.

"The fiscal deficit was almost eliminated, the Cypriot banking sector has been restructured, competitiveness of the economy has been restored," Regling said in a video statement.

He added that the main challenge now facing Cyprus was the 47 percent rate of non-performing loans in the Cypriot banking system, which was badly hit by the debt restructuring in Greece.

"The single biggest issue in Cyprus today are the non-performing loans of the banking sector; they're the highest in Europe," Regling said.

"I find it reassuring that the president of the Cypriot Republic and the finance ministers have emphasised their willingness to continue with the reforms, and to focus on the remaining challenges," he said.

Ireland, Portugal and Spain have also successfully exited their bailout programmes. Greece, however, had to ask for a third bailout in the middle of last year.

(Reporting By Jan Strupczewski, editing by Larry King)


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