Greek Cypriot puts blame on Greece

ATHENS - Agence France-Presse

President Demetris Christofias says Greek Cypriot economy is badly affected by heavy exposure to Greece. Greek Cyprus will cut public debt with reforms, he says. REUTERS photo

Greek Cyprus President Demetris Christofias on blamed yesterday the island’s economic troubles on Greece’s woes and insisted that reforms by his government would check a growing public deficit.

“The economy of [Greek] Cyprus continues to have healthy foundations despite the problems, distortions and inequalities accumulated over the years,” the Communist politician told To Vima weekly in an interview.

Greek Cyprus takes over the European Union’s rotating presidency on July 1.

Estimates are that it needs around 4.0 billion euros to prop up its banks and help narrow the budget deficit, which widened last year to double the EU ceiling of three percent of gross domestic product (GDP).

“Cyprus is not facing the prospect of entering (a rescue) mechanism because of the fiscal state of the economy but because of the need to recapitalise Cypriot banks which have important exposure to the Greek economy,” Christofias said.

“In every downgrade of the Cypriot economy the exposure of our banks to Greece is portrayed as the main cause,” he said.

Christofias said reforms already undertaken would bring the deficit to “around 3.0 percent” from 6.5 percent in 2011, with the aim of trimming it further to “as close to 2.5 percent as possible.” Cyprus will ask Russia for a loan of up to 5.0 billion euros ($6.4 billion) this week and then request aid from eurozone partners for its ailing banks, an EU diplomat said Wednesday.

The crisis-hit Greek Cyprus will “first try to get a bilateral loan from Russia,” said the diplomat, speaking on condition of anonymity.

Cyprus would then probably request eurozone aid for its banks next week along the lines of an offer made to Spain, he said.

The government is already committed to underwriting a 1.8 billion euro capital issue for the island’s worst exposed institution -- Marfin Popular Bank -- to recapitalize against the Greek debt crisis.