CAIRO – The European Union will release about half of a 1.2 billion euro package of grants and loans to Egypt, officials said Wednesday, a badly needed boost for the battered Egyptian economy.
The EU said the other half of the program depends on agreement with the International Monetary Fund on an even larger loan. An IMF delegation is extending its stay in Cairo to keep working on that.
An economic slowdown has plagued Egypt since last year's uprising that toppled longtime President Hosni Mubarak. Egypt's government has been scrambling for loans and grants to counter a huge deficit, prop up its currency and reverse a lagging growth rate. There are objections to some of the IMF's reform demands for its $4.8 billion loan.
An IMF delegation has been in Cairo for nearly two weeks. IMF spokeswoman Wafa Amr told The Associated Press that the team would remain in Cairo for a few more days to continue the discussions.
In parallel, the EU is working on its own aid package.
Bernandino Leon, the EU's special representative for the southern Mediterranean region, said part of the 1.2 billion euro package can be released as budget deficit relief, but 500 million euros is linked to the IMF.
An EU delegation led by policy chief Catherine Ashton is in Cairo to launch a host of new economic cooperation efforts and development programs.
Ashton said Wednesday at a news conference that the European Union would provide "loans and grants worth about 5 billion euros in 2012 and 2013," but did not provide details. Ashton also met with President Mohammed Morsi on Wednesday.
During a meeting with Wednesday with the EU delegation, Egyptian Prime Minister Hesham Kandil said his government is looking for more cooperation with the 27-member bloc.
The government is under pressure to begin economic reforms to bolster Egypt's ailing economy and cut a budget deficit that amounts to 11 percent of the GDP.
Austerity measures, such as reducing costly fuel subsidies and reforming the tax system, are conditions of the IMF loan that are likely to raise objections.
Nearly two years after a popular uprising that was fuelled in part by demands for social justice, Egypt is still struggling with labor unrest.
Workers for the local train in the Egyptian capital called off a strike Wednesday five hours after bringing Cairo's already snarled traffic to a standstill.
The strike ended after the government caved in to the workers' key demand, firing the chairman of the subway system.
The workers were also protesting poor working conditions, inadequate equipment and poor management of the two-line subway that serves up to 4 million passengers a day in the city of 18 million people.
Like employees in other sectors, the workers are also demanding better pay and a share in the company's profits.