Brussels, 26/06/2012 (Agence Europe) - Cyprus is the fifth eurozone nation to ask for financial aid from its partners (Cyprus joined the euro in January 2008), needed to bail out its banks and also the economy, suffering from its huge exposure to the Greek economy (see EUROPE 10639). “The government of the Republic of Cyprus has today informed the appropriate European authorities of its decision to submit to euro area member states a request for financial assistance”, read a statement released by the Cyprus government. “The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spillover effects on its financial sector, due to its large exposure to the Greek economy”, the statement added.
Cyprus is reported to be seeking a full bailout of its economy, along the lines of those for Greece, Ireland and Portugal, in which case fact-finders from the troika (European Commission, ECB and IMF) will shortly travel to the island to assess financial needs and the strings to be attached to the aid. The Cypriot finance minister, Vassos Shiarly, says the amount will be enough to recapitalise banks and meet budget obligations and will be decided after a detailed examination over the next few weeks. The Cypriot media suggests it will be in the region of €5 billion. Nicosia needs €1.8 billion by the end of the year to recapitalise the People's Bank of Cyprus. The Big Three credit rating agencies have downgraded Cyprus to junk bond status and it has been unable to raise funds on the money markets for the past year.
Jean-Claude Juncker, the head of the Eurogroup, said that the Eurogroup would examine Cyprus' request rapidly (it was lodged on the same day as Spain's - see EUROPE 10641). He said the aid was mainly required to deal with the banks. The European Commission forecasts that the Cypriot public deficit will reach 3.4% of GDP in 2012, although it is supposed to reduce it to 3% this year. (MB/transl.fl)