EU 'approves $6.4bn Egypt financial aid package'

Catherine Ashton meets Mohammed Mursi in Cairo (14 November 2012) EU foreign policy chief Catherine Ashton wants to boost economic ties between Egypt and Europe

The European Union has approved a 5bn-euro ($6.4bn) financial support package for Egypt, Egyptian officials say.

A statement by President Mohammed Mursi's office said the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) would each provide 2bn euros.

The remaining 1bn euros would come from EU member states, the statement added.

The announcement came after Mr Mursi held talks with the EU's foreign policy chief, Catherine Ashton, in Cairo.

In a statement, the presidency said the packages was "a strong sign of the EU's support for Egypt's path to development".

Representatives of some 100 of Europe's largest firms as well as European Commission members and European MPs are participating in the meetings, due to conclude later on Wednesday.

Their focus is on strengthening bilateral relationships between Egypt and the European Union and deepening economic co-operation.

New jobs

In September, European Commission President Jose Manuel Barroso offered Egypt 700m euros of financial aid, which he said was conditional on it reaching an agreement with the International Monetary Fund (IMF).

Egypt is expected to sign a memorandum of understanding with IMF representatives for a $4.8bn loan this week to help it deal with a $28bn budget deficit, or 11% of GDP, and a balance of payments crisis which are the result of reduced tourism and foreign investment revenues.

In the 21 months since the overthrow of former President Hosni Mubarak in February 2011, Egypt's growth rates have dropped and its foreign reserves have been almost halved.

On Tuesday, Prime Minister Hisham Qandil caused controversy among Egypt's poor - about 40% of its 83 million people live on less than $2 a day - by saying he would restructure the government subsidy programme.

He also said natural gas prices would be increased for energy-intensive industries, and that there would be unspecified fiscal and tax reforms.

Mr Qandil said the government aimed to increase Egypt's GDP growth rate to 3.5% this fiscal year, up from 2.2%, and create 700,000 new jobs.

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