Cyprus issues EU bailout warning
Published 13/06/2012 | 21:12
Cyprus could seek a European Union bailout to help recapitalise its banking sector before crucial elections in Greece this Sunday, its finance minister has warned.
Vassos Shiarly said that the Greek elections - seen as a vote on whether the debt-wracked country stays or leaves the eurozone - are a key factor to Cyprus' decision whether to become the fifth eurozone member to ask for EU bailout money.
"The chosen time (to seek a bailout) will be decided in cooperation with all European Union partners, either within the eurozone or the Union as a whole," Shiarly told a business forum in the capital, Nicosia.
"We also know that the deadline by which the recapitalisation of banks has to be completed is very, very close. But because the problem that may arise from the (Greek) elections this coming Sunday is perhaps of the highest importance, this is also taken into account in our overall assessment."
Shiarly cited the example of Spain, which last weekend asked for a loan lifeline of up to 100 billion euros (£80 billion) from the 17 countries that use the euro to shore up Spanish banks.
"In most cases action is taken and the appropriate moment, meaning when the markets are closed," he said.
Unable to borrow from international markets because of its junk credit rating, Cyprus has until June 30 to come up with 1.8 billion euros (£1.45 billion) - a tenth of its budget - to support Cyprus Popular Bank, its second largest lender which is most exposed to Greek debt and is unlikely to raise the money on its own.
Shiarly and other Cypriot officials have said that the money could either come from the EU bailout fund, or through a loan from another country.
Either way, time is running out for the tiny country of 850,000 people with strong cultural and business ties to Greece as the possibility over an anti-bailout party victory in Sunday's vote could further harm Cyprus' economy.
Greece is holding the June 17 repeat election following an inconclusive May 6 ballot in which voters turned to smaller, mainly anti-bailout groups that have promised to renege on Greece's austerity commitments that were made in exchange for international bailout money.