DUBLIN (AP) -- European Union finance ministers agreed Friday to grant Ireland and Portugal seven years more years to pay their bailout loans, easing the burden on their economies and paving the way for a quicker return to sustainable growth.
In their attempts to make progress to stabilize the economy of the 17 nations sharing the euro currency, the ministers also approved a 10-billion-euro ($13 billion) rescue loan package to stop Cyprus from sliding into bankruptcy.
But the rescue comes at a heavy price for the tiny Mediterranean island country. Cyprus, with an annual economic output of under 18 billion euros, must itself contribute 13 billion euros to turn its economy around, levied through inflicting losses on holders of large bank deposits, tax increases, and privatizations.
However there was only little progress made on the other plan EU officials have billed as vital in helping turn the tide in the bloc's 3-year-old debt crisis -- the setting-up of a full-fledged banking union.
The 17 ministers endorsed the legal framework for a central authority for Europe's banks, which had been hammered out between government representatives and the European Parliament last month. It is set to take effect starting next year.
On the fundamental question of setting up a joint bank resolution mechanism and enabling Europe's bailout fund to directly recapitalize troubled banks, however, ministers reached no conclusion.
Olli Rehn, the EU's top economic official, insisted that "the timeline for establishing a banking union should be as short as possible."
"The banking union is not created and completed overnight, but we must have a clear perspective for the banking union, with a specific timeline," he added.
Jeroen Dijsselbloem, who chairs the meetings of th Eurogroup of finance ministers, said he expected the bloc to reach agreement on the outstanding issues by June.
The decision to extend the loan repayment schedules for Ireland and Portugal proved uncontroversial and was expected to be backed by the finance ministers of all 27 EU ministers, who were meeting Friday afternoon in Dublin.
Ireland holds the six-month rotating presidency of the European Union, and the ministers are meeting in historic Dublin Castle, once the seat of the country's English overlords and, later, of the Irish government itself.
The loan repayment extensions are intended to ease financial pressure on the countries, helping them resume long-term bond sales when their bailout loans run dry. Ireland's loans run out later this year; Portugal's in 2014.
The situation in Portugal was complicated last week when the country's constitutional court struck down parts of the government's austerity program that was agreed to in return for an international 78 billion euros bailout. The government will unveil new measures next week to meet its deficit reduction targets. Those measures will have to be assessed by the country's so-called troika of creditors -- the European Central Bank, the European Commission and the International Monetary Fund -- to see whether they sufficiently plug the shortfalls.
Ireland in 2010 received a 67.5 billion euros loan package after being sunk by having to bail out the country's banks which had taken on risky bets that went wrong in the wake of the 2008-2009 global financial crisis.
Olli Rehn, the European Commission's top economic official, welcomed the decision, but stressed both countries needed to stick to their programs of fiscal consolidation and structural reforms.
"This is another very important step forward toward a sustained return to full market financing for both countries," Rehn said.
The rescue loan package for Cyprus, in turn, still needs parliamentary approval in several eurozone member nations. Those votes are expected to be finalized by the end of the month, with the first loan disbursement planned in May, Dijsselbloem said.
Cyprus had to request a bailout after its outsized banking sector started tumbling amid heavy losses on bad investments. The bailout program demands a lot of effort by Cyprus to bring its finances in order, and the harsh restructuring of the banking sector and the required austerity measures are expected to slash the country's GDP by about 13 percent over this and year and next.
The creditors' package predicts the island will return to growth in 2015, but the EU's Rehn appeared to acknowledge that the projections involved a bit of guesswork, given the great uncertainties stemming from the island's harsh adjustment measures.
"There is plenty of uncertainty about the exact trajectory of economic growth in Cyprus -- it will depend on many things, starting with the effective implementation of all the program -- and relating to the stabilization of the financial system, and the overall national economy," Rehn said.
"So at this stage we do our best, and have done it as thoroughly as we can," he said.
The rescue loans will further increase Cyprus' debt, which is set to peak at 126 percent of GDP in 2015. That would be one of Europe's highest debt burdens, raising serious questions about the feasibility of returning to the markets to refinance the counties debt in the following years.
Several analysts have warned that Cyprus might have to engage in further fiscal tightening or might need more assistance to get by if the economy remains in recession for longer than forecast.
The meetings in Dublin will continue on Saturday.