12/06/2012 07:13
Cyprus is closer than ever to the EU bailout mechanism. For the first time yesterday, the Finance Ministry stated that support will not cover banks only, but also the state’s future finance needs.
Vassos Shiarly told the Parliament that the issue is urgent since Cyprus Popular Bank’s recapitalization is getting closer. By the end of June the state must support the bank with capital of €1.8 billion that corresponds to 10% of Cyprus GDP.
The Minister explained that their first thought was to exchange government bonds with shares but possibly this will not be accepted by the European authorities.
“Similar request was submitted by Spain and was rejected”, he said.
Greece, Portugal, Ireland and Spain appealed to the mechanism during weekend, when markets are closed.
Cyprus Popular’s issue expires on June 29 and if same practice is followed, Cyprus will appeal this or next weekend.
Some in Cyprus and Europe insist that Cyprus must appeal before Greek elections.
European authorities are on hold. Informal meetings between the Central Bank of Cyprus and the European Commission are a fact.
Last night, Dow Jones cited unnamed sources from the European Commission claiming that Cyprus must appeal before the elections because then the EC will be busy with the Greek crisis.
The government still insists that support has to do with banks only.
The Minister admitted, later on however, that appeal will also cover the state’s future financing needs, estimated to reach €4 billion in the next 18 months.
Although suggestive for the mechanism seems to pave the way for an appeal, the government still keeps open the possibility of borrowing from a third country.
The Minister said there were expectations that this would happen by the end of May, leaving the impression that the scenario is still here.
In 2011, the state borrowed €2.5 billion from Russia to meet this year’s financing needs.
The government seems to prefer taking a bilateral loan because it is not accompanied by conditions.
If, however, such assistance is for banks, Cyprus hopes that support will not be accompanied by harsh conditions, except those to comply with the commitments given to the Commission for reform.
Even yesterday, however, the Minister gave no details of the measures to be taken by Cyprus to cut deficit to 2.5% from 3.5% expected this year.
Vassos Shiarly told the Parliament that the issue is urgent since Cyprus Popular Bank’s recapitalization is getting closer. By the end of June the state must support the bank with capital of €1.8 billion that corresponds to 10% of Cyprus GDP.
The Minister explained that their first thought was to exchange government bonds with shares but possibly this will not be accepted by the European authorities.
“Similar request was submitted by Spain and was rejected”, he said.
Greece, Portugal, Ireland and Spain appealed to the mechanism during weekend, when markets are closed.
Cyprus Popular’s issue expires on June 29 and if same practice is followed, Cyprus will appeal this or next weekend.
Some in Cyprus and Europe insist that Cyprus must appeal before Greek elections.
European authorities are on hold. Informal meetings between the Central Bank of Cyprus and the European Commission are a fact.
Last night, Dow Jones cited unnamed sources from the European Commission claiming that Cyprus must appeal before the elections because then the EC will be busy with the Greek crisis.
The government still insists that support has to do with banks only.
The Minister admitted, later on however, that appeal will also cover the state’s future financing needs, estimated to reach €4 billion in the next 18 months.
Although suggestive for the mechanism seems to pave the way for an appeal, the government still keeps open the possibility of borrowing from a third country.
The Minister said there were expectations that this would happen by the end of May, leaving the impression that the scenario is still here.
In 2011, the state borrowed €2.5 billion from Russia to meet this year’s financing needs.
The government seems to prefer taking a bilateral loan because it is not accompanied by conditions.
If, however, such assistance is for banks, Cyprus hopes that support will not be accompanied by harsh conditions, except those to comply with the commitments given to the Commission for reform.
Even yesterday, however, the Minister gave no details of the measures to be taken by Cyprus to cut deficit to 2.5% from 3.5% expected this year.
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