Business | Economy

Cyprus said to seek 11b-euro bailout

The amount constitutes 62% of gross domestic product

  • Bloomberg
  • Published: 14:49 October 4, 2012
  • Gulf News

Nicosia: The Cypriot government will seek an 11 billion-euro (Dh52.8 billion, $14.2 billion) bailout, 62 per cent of gross domestic product, to recapitalise its banks and pay its bills, according to three people with direct knowledge of the matter.

The country’s banks, which lost more than 4 billion euros in Greece’s debt restructuring earlier this year, need 5 billion euros of fresh capital, according to Finance Minister Vassos Shiarly, the people said. The so-called troika that oversees euro-area rescues puts Cypriot banks’ recapitalisation needs at about 10 billion euros, the people cited Shiarly as saying.

“As we are in continual discussions with troika team, you appreciate that, as we have maintained throughout the discussion period, we are unable to comment on the recapitalisation figures,” Shiarly said on Thursday in an e-mailed reply to questions. “However, regarding to the government’s overall financing and refinancing until January 2016, we confirm that the said figure is approximately correct.”

Cyprus on June 25 became the fifth country in the euro area to seek external aid. No amount was specified for the rescue, which will encompass the public sector as well as banks. Cyprus has also sought a 5 billion-euro loan from Russia. Igor Shuvalov, a first deputy prime minister, said on September 8 that Russia may make a decision on the request within a month.

The Cypriot government also needs 6 billion euros to redeem debt and close a budget gap through 2015, Shiarly has said, according to the people who declined to be identified because the information hasn’t been made public. Cyprus faces 4.7 billion euros of bond redemptions in the period, according to data compiled by Bloomberg.

The Cypriot government, which had 492.4 million euros in the bank at the end of August, faces 751 million euros of maturing debt through the end of November, according to the Finance Ministry. The government also has monthly outlays for salaries, subsidies and social programs, with a larger year-end wage payment due in December.

Striking a bailout deal with the troika, consisting of officials from the European Commission, European Central Bank and the IMF, is essential for the government to pay its bills through the end of the year, the people cited Shiarly as saying.

The Cabinet yesterday approved a counter-proposal to the troika that it plans to discuss with political parties, unions and business groups before bailout talks resume, government spokesman Stefanos Stefanou said without elaborating.

Shiarly told reporters that Cyprus may receive the first instalment of aid at the end of December if the terms of the bailout are approved by euro-area finance chiefs by mid- November. No date has been set for reopening talks with the troika, he said. Cyprus has been shut out of markets since May 2011.

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