Brussels, 31/01/2013 (Agence Europe) - Publication of a report by US consultants PIMCO on the bailout needs of Cypriot banks, expected on Saturday 2 February, should shed light on the sustainability of Cyprus' debt. A preliminary report suggested some €10 million would be needed to bail out the country's banks. Although PIMCO is expected to scale this back to between eight and nine billion, at a meeting with Dutch parliamentarians on Thursday, Cypriot Finance Minister Vassos Shiarly talked of €10 billion.
Along with aid to recapitalise its banks, Cyprus is reported to require between €6 billion and €6.5 billion to service its existing debt. The amount of aid needed may well come to 100% of the country's GDP, raising doubts about its ability to pay back the loans.
The structure of the debt means it is difficult to organise a write down. Deutsche Bank says 47% of its is held by Cypriot banks and 28% by foreign governments. Shiarly talked in The Hague of a writedown for junior bond-holders (those not automatically refunded in the event of default).
Russian aid. In order to reduce the debt burden, a source suggests Cyprus has asked Moscow to extend the maturity of the €2.5 billion loan it granted in 2011 until 2018. The media talk about 2022. The source says this would not lead to increased interest rates. Russia may possibly lend more cash, via the International Monetary Fund. Cyprus says Russia is in direct contact with the European Commission.
Because the PIMCO report will shortly be forthcoming, the eurozone is expected to discuss Cyprus at the Eurogroup meeting on Monday 11 February. Many commentators in Germany query whether there is really much danger to the eurozone if Cyprus defaulted, because it accounts for barely 0.2% of eurozone GDP. Several Bundestag parlimentarians dislike the idea of providing financial aid to a country they see as verging on a tax haven. The same source, brushing off these concerns, said that the comments were simply part of the electioneering in Germany.
A leading candidate for the elections on 17 February, the head of Democratic Assembly, Nicos Anastasiades, said that when Europeans realise that their partner is determined to implement the terms of the agreement, then they will be more likely to demonstrate solidarity, adding that this was what had been seen with the Greek government under Antonis Samaras.
Liberal concerns. Sir Graham Watson MEP and President of the European Liberal party, slammed the way Cypriot media are discriminating against Liberal candidate Praxoula Antoniadou-Kyriacou, who has had to appeal to the European Court of Justice to get fair media coverage. Watson said: “The right to speak and for all parties and candidates to be heard is a fundamental part of European and modern democracy. In light of the country's recent Presidency of the European Council it is deeply regrettable that legal action is necessary to secure this”. (EL/transl.fl)