Cyprus hit with demand for extra 6bn euros
Cyprus President Nicos Anastasiades has appealed to the European Union for help after his island was hit for another 6bn euros as the price of its eurozone bailout.
The cost of bailing out Cyprus has risen to 23bn euros, with the crisis-hit island having to take on the lion’s share of the measures needed to avoid bankruptcy.
Cyprus must soon raise 13bn euros – nearly twice the amount the government thought it would have to come up with just a month ago – to keep its debt and deficit from spinning out of control and to meet the terms of a 10bn euro international bailout.
The money will be raised by imposing heavy losses on large bank deposits, levying additional taxes, privatisations and a part-sale of the central bank’s gold reserves.
The European Commission, the European Central Bank and the International Monetary Fund are set to grant the Mediterranean island nation a 10bn euro rescue loan package to recapitalise Cyprus’s shaky banking system and keep the government afloat.
For its side of the deal, Cyprus was supposed to contribute 7bn euros to the rescue.
Bridging the gap
Luxembourg’s finance minister said that Europe and the International Monetary Fund could not increase their 10bn contribution to a bailout for Cyprus despite news that the cost to the island is going to be higher than expected.
“I believe the policy will be that the volume will remain at 10bn,” Luxembourg’s Luc Frieden told German radio from Dublin, where European Union finance ministers were due to meet.
Restructuring its banks will eventually reduce the island’s financing needs, and other measures would help it bridge the gap, he said.