NICOSIA, Cyprus -- Cyprus' finance minister says he expects the final round of talks with potential creditors on a bailout agreement to start next week. Separately on Wednesday, international ratings agency Standard & Poor's sank Cyprus' credit rating deeper into junk over concerns that the government is taking too long to negotiate a rescue deal.
Vassos Shiarly said there's no specific date when officials from the so-called troika _ the European Commission, the European Central Bank and the International Monetary Fund _ will arrive here. But he expects negotiations to start immediately after the government this week wraps up discussions with political parties and trade unions on the kind of bailout deal it should seek.
Shiarly said negotiations with the troika will begin "definitely within the coming week" because "time is limited and so we're working on a very tight schedule."
S&P's three-notch downgrade of Cyprus to `B' and warning that another rating cut may be on its way only underscores how time is running out for the country to get the financial help it needs to save its banks and economy before continued uncertainty makes things worse.
Rating agency Moody's also slapped Cyprus with a three-notch downgrade to B3 earlier this month over fears that the amount that banks will need to recapitalize will choke off growth.
S&P said political considerations ahead of a presidential election set for February next year may have contributed to the delay. It also said that bad domestic loans held by Cypriot banks have increased faster than expected, possibly raising the amount of money they would need to recapitalize.
That would, in turn, push the country's debt to 130 percent of gross domestic product, making it difficult to service and increasing the risk that the debt may need to be restructured.
Shiarly said that the troika wants Cyprus to make (EURO)975 million ($1.28 billion) in spending cuts over three years. Estimates on the size of the bailout Cyprus will need to prop up its ailing banks and pay its bills range between (EURO)12 billion to (EURO)17 billion ($15.74 billion to $22.3 billion).
S&P estimates a bailout of some (EURO)15 billion, but the country may need more if an ongoing probe into the books of Cyprus' commercial banks and cooperatives concludes that they hold more bad loans than they believe.
Cyprus's coffers are drying up fast and the country _ with its credit rating deep into junk _ can't tap international markets. A bid to clinch a (EURO)5 billion ($6.56 billion) low-interest loan from Russia appears to have stalled. Cyprus last year asked and received from Moscow a (EURO)2.5 billion ($3.28 billion) to get by this year.
S&P said any Russian loan would likely come part and parcel with a troika bailout.
Now the rush is on to hammer out an agreement by Nov. 12 when ministers from the other 16 countries that use the euro meet to discuss Cyprus' case and sign off on the bailout so that the first batch of cash can arrive before the year is out.
"There is only one aim now, and that's to save this country and lead it out of crisis," opposition DIKO party spokesman Fotis Fotiou said. "It's time to put Cyprus above party considerations."
Cyprus asked for a bailout in June with troika officials visiting in July. But delays in soliciting support from political parties and trade unions to avoid social upheaval pushed negotiations with the troika back and prompted calls from top European Union officials to speed things up.
Shiarly said Cyprus needs (EURO)4.5 to (EURO)5 billion ($5.9 to $6.56 billion) to refinance its debt over the next three years. But he repeated that the government disagrees with the troika on how much the banks' recapitalization needs will be, amid concerns that a high figure will make the country's debt level unsustainable.
Meanwhile Cyprus' growth prospects look increasingly bleak. S&P projects the economy to contract an average 2 percent between 2012 and 2014.