Open

Coming up

Don't miss

Replay


LATEST SHOWS

BUSINESS DAILY

New French economy minister signals changes to 35-hour week

Read more

MEDIAWATCH

'Macron-economy' pun already worn out

Read more

DEBATE

What Next for Gaza? Lasting Ceasefire Agreed After 50 Days of War (part 2)

Read more

DEBATE

What Next for Gaza? Lasting Ceasefire Agreed After 50 Days of War

Read more

FOCUS

Video: Milan is starting point for Syrian refugees’ European odyssey

Read more

MIDDLE EAST MATTERS

Terrorist ransoms: Should governments pay up for hostages?

Read more

ENCORE!

Kristen Stewart and Juliette Binoche star in 'Clouds of Sils Maria'

Read more

WEB NEWS

India: journalist launches "Rice Bucket Challenge"

Read more

WEB NEWS

Russian aid convoy: Mission accomplished?

Read more

  • Ukraine calls on NATO amid rebel counter-attack

    Read more

  • New French economy minister takes swipe at 35-hour work week

    Read more

  • Mother of American journalist asks IS leader for his release

    Read more

  • UN probe accuses Syrian regime, Islamists of ‘crimes against humanity’

    Read more

  • Uruguayans sign up to grow marijuana at home

    Read more

  • Missouri governor appoints black public safety director

    Read more

  • French unemployment rises 0.8% in July to record high

    Read more

  • Video: Iraq’s Yazidis flee to spiritual capital of Lalish

    Read more

  • Video: Milan is starting point for Syrian refugees’ European odyssey

    Read more

  • Airstrikes and Assad - Obama’s military conundrum in Syria

    Read more

  • IMF’s Lagarde investigated in French corruption case

    Read more

  • American journalist held captive in Syria arrives in US

    Read more

  • In pictures: The ministers in France's new government

    Read more

  • 'Lasting' ceasefire agreed for Gaza, Abbas says

    Read more

  • Far-right ‘Russian Jihad’ fighters cross into Ukraine

    Read more

  • Rebels 'shoot down' UN helicopter in South Sudan

    Read more

Europe

Cyprus requests bailout citing Greece exposure

Text by News Wires

Latest update : 2012-06-25

Cyprus on Monday announced it was applying for a eurozone bailout, claiming its banks have been hit hard by exposure to Greek debt. The nation needs 1.8 billion euros to recapitalise its leading bank, Cyprus Popular Bank.

REUTERS - Cyprus became on Monday the fifth euro zone country to seek financial assistance from the EU’s rescue funds, announcing it was applying for a bailout for its banking sector hit by exposure to the crisis in Greece.

Tiny Cyprus needs to raise at least 1.8 billion euros - equivalent to about 10 percent of its domestic output - by June 30 to satisfy European regulators about the health of Cyprus Popular Bank, which saw its balance sheet hurt by bad Greek debt. It may seek more.

“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,” a government announcement said.

With its coffers emptying rapidly and hurtling towards an immovable deadline, the island suffered a further fiscal sovereign credit rating cut to non-investment, or junk, status by Fitch at BB+.

With a bailout widely viewed as all but inevitable, Cyprus has for weeks been trying to juggle its options between a bailout from Europe’s rescue funds, the temporary EFSF and the permanent ESM, or a bilateral loan from either Russia or China.

Cypriot President Demetris Christofias was scheduled to brief political leaders on Tuesday afternoon, a statement from the presidency said.

If Cyprus signs up for the EU rescue programme it will join the ranks of Greece, Ireland, Portugal and Spain.

Christofias, the EU’s only Communist leader, has been reluctant to accept the fiscal and regulatory conditions that might be attached to a European rescue. Weekend trips by government officials to China suggested Cyprus was still holding out hope for a bilateral loan from a third country.

Commerce, Industry and Tourism Minister Neoklis Sylikiotis confirmed discussions in China were focused on a loan or a Chinese investment in the troubled Cyprus Popular Bank.

“We have had some contacts... We have requested an answer in coming days,” Sylikiotis said in comments to the state broadcaster.

Cyprus is fiercely protective of a corporate tax rate that is one of the lowest in the EU and eight months before a general election shows no appetite for the stringent spending cuts that any EU funding would tie it to.

“I think they want to avoid it (the EFSF) at least as the sole provider simply because they are afraid of the strings attached,” said political analyst Hubert Faustman.

Officials say any aid via the EFSF would likely be restricted to the banking sector and not to broader budgetary requirements.

Cyprus, with just 1 million people, has a disproportionately large off shore financial sector that is heavily exposed to Greece, the larger neighbour with which it has close political links.

Cyprus Popular needs a capital infusion urgently to satisfy regulators after writing off the value of Greek government bonds in a sovereign debt swap earlier this year.

In its report, Fitch said the recapitalisation bill for Cypriot banks could potentially reach 4 billion euros. That amount, equivalent to 23 percent of GDP, would also take into account rising non-performing loans from the domestic market.

Fitch said it saw a heightened possibility of the Republic needing both an EFSF bailout to recapitalise its banks and a bilateral loan from Moscow to cover gross budgetary financing requirements until the end of 2013.

Moscow already provided Cyprus with 2.5 billion euros in a bilateral loan last year and has an interest in maintaining Cyprus as an offshore financial centre with low tax rates for Russian businessmen, who use it as a base to reinvest in Russia.

However, seeking such large sums from Moscow or Beijing is controversial in Cyprus, where EU membership is a matter of national pride. It could be embarrassing for Brussels as well, as Cyprus assumes the bloc’s rotating presidency on July 1.

Date created : 2012-06-25

  • SPAIN - BANKING

    Spain formally asks eurozone for bank bailout

    Read more

  • GREECE

    Greece seeks to ease bailout conditions

    Read more

  • FINANCE

    Moody's downgrades 15 major banks

    Read more

COMMENT(S)