Belfast Telegraph

Home News World

Cyprus seeks £9.2bn bailout package

Cyprus is aiming to get a bailout of about 11.5 billion euros (£9.2 billion) from the other 16 countries that use the euro to recapitalise its troubled banks and pay its bills, officials have said.

The sum is significantly less than what potential rescuers estimate it needs.

Finance Minister Vassos Shiarly has repeatedly said that Cyprus needs around 4 billion euros (£3.2 billion) to cover expenses until 2016. But he has steadfastly refused to say how much would be needed for its banks - only that government estimates differ greatly from those of the international organisations it is currently negotiating a bailout with - the 'troika' of the European Commission, the European Central Bank and the International Monetary Fund.

Officials said the finance ministry puts banks' needs at 5 billion euros (£4 billion), while the troika puts them at 9 billion euros (£7.2 billion) and possibly more.

Cypriot banks have lost billions on their Greek bond holdings and have large loan portfolios in the debt-ridden country. The key difference between Cyprus's and the troika's estimates is what constitutes a non-performing loan, with the troika laying out stricter terms.

The Cyprus Central Bank has declined to disclose how much it would take for banks to shore up their capital base, saying only that their exact needs will be determined through a troika-supervised stress test expected to conclude in December when the government hopes to receive the first batch of bailout money as state coffers start to run dry.

The country, the eurozone's third-smallest economy with a gross domestic product of around 18 billion euros (£14.4 billion), originally approached the eurozone for aid in June.

The Finance Ministry is also looking to incorporate into a bailout agreement a 2.5 billion euros (£2 billion) loan Cyprus secured from Russia last year when it was locked out of the international bond markets by prohibitively high interest rates. Cyprus has also asked Moscow for another 5 billion euros (£4 billion).

Overall, the Cypriot government bailout target represents almost two-thirds of the country's annual economic output. Troika officials are expected back on the island later this month to conclude a bailout deal.

Cyprus's left-wing government is resisting the troika's harsh austerity measures - estimated at almost 1 billion euros (£801 million) - including a 15% pay cut for public sector employees.

Popular

From Belfast Telegraph