Wednesday June 27, 2012
Cyprus seeks EU bailout for banks, budget deficit
NICOSIA: Cyprus said it was applying to Brussels for a bailout, both for its banking sector hit by exposure to Greece and for its budget deficit, making it the fifth eurozone country to turn to the bloc's rescue funds for help.
Tiny Cyprus has just four days left to raise at least 1.8 billion euros equivalent to about 10% of its domestic output to meet a deadline set by European regulators to recapitalise Cyprus Popular Bank, its second largest lender which saw its balance sheet hurt by bad Greek debt.
Finance Minister Vassos Shiarly said the country would also seek enough money to help with its budget deficit. The full amount would be decided over the course of weeks.
“The amount will be as much as it may be needed to cover the recapitalisation and fiscal requirements,” he told Reuters. “These will be established after careful review during the next few weeks.”
The announcement means Cyprus would follow Greece, Ireland, Portugal and Spain into the arms of the emergency rescue funds set up for the 17-member euro currency zone.
“This will include measures that will address the main challenges of the Cyprus economy, primarily those of the financial sector, and I expect that Cyprus will engage with strong determination in the required policy actions,” he said.
With its coffers emptying rapidly and hurtling towards an immovable deadline, the island suffered a further sovereign credit rating cut on Monday by Fitch, to the non-investment, or junk, BB+ grade. Cyprus has already been shut out from raising new funds on capital markets, with yields on its existing bonds well into double digits.
Cypriot officials said the bailout request did not specify how much they need from their EU partners.
A government statement said: “The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spill-over effects through its financial sector, due to its large exposure in the Greek economy.” - Reuters