Merkel: Cyprus Must Follow Reforms

German Chancellor Angela Merkel urged Cyprus on Friday to follow economic reforms, two days after saying the eurozone bailout candidate will not see any special terms as it seeks an aid package.

Merkel, who attended an extraordinary summit of the center-right European People's Party in the port city of Limassol, also said the reportedly 17 billion euro ($22 billion) bailout package will not be decided "now."

"We are here today to study the situation of Cyprus and the situation in other European countries," Merkel, speaking in German, told reporters before attending the summit.

"I will say to Cyprus that the task will be such that on one side it must follow reforms and on the other side there has to be solidarity from other European countries."

Merkel did not clarify what reforms Cyprus must undertake, but the island has already pushed through tough austerity measures to meet the demands of eurozone creditors for more than one billion euros in cuts and savings.

Merkel said a package being hammered out in talks between Cyprus and the "troika" of the European Commission, the European Central Bank and the International Monetary Fund "are not at the stage to decide now."

Her remarks echoed those made on Wednesday, when she said "there are no special conditions for Cyprus... We have generally accepted rules in Europe and we are a long way from finishing the negotiations."

Nicos Anastasiades, leader of the Democratic Rally of Cyprus, which hosted the meeting, said after the gathering ended that the island does not expect any sort of special treatment.

"I explained that Cyprus can come out of this situation, but today it needs support from its European partners," Anastasiades, a frontrunner the campaign for February's presidential election, told a post-meeting press conference.

"I assured the members of our determination to implement the measures they want us to implement for the revival of our economy... and we are not asking any special treatment."

Speaking in Greek he dismissed reports that the island was a haven for questionable funds as "unfair and exaggerated," adding that Cyprus can be "reliable, effective and efficient."

There have been stories, especially in the German media, alleging that Cyprus has become a haven for Russian mafia barons with dirty money, allegations Nicosia has strenuously denied and dubbed as "back-stabbing" by its European partners.

EPP Secretary General Antonio Lopez-Isturiz said Cyprus and other European nations were facing "difficult times" and that the time had "come for a change, change for good, change to get a new leadership for Cyprus."

Expressing an optimistic tone he said: "There were those who thought Europe will fail... but things are changing. It's happening in my country, Spain... its happening in Greece" too.

Ahead of the Limassol meeting, officials had said it was expected to be dominated by the situation in Cyprus and across the eurozone.

As an indication of Cyprus's parlous economic state, Moody's downgraded the government bond rating by three notches from B3 to Caa3 on Thursday, citing the anticipated increase in the government's debt burden.

The downgrade to middle-range junk bond status was driven by the further increase in the amount of government support Cypriot banks are likely to require. Cyprus's banks face rising delinquencies on loans to Greek and Cypriot customers.

The EPP is the largest and the most influential European-level political party of the center-right.