Greek Cyprus may need huge bailout

NICOSIA - Reuters

After news hit that Greek Cyprus would seek funding from the EU the local media reported yesterday that the bailout could be as much as half the size of its economy. EPA photo

Cyprus, which became the fifth euro zone country on Monday to seek emergency funding from Brussels, may require a bailout amount worth up to half the size of its economy, domestic media reported yesterday.

The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said on Monday it was formally applying for aid from the European Union’s rescue funds.

Cyprus needs to plug a 1.8 billion euro - or 10 percent of its GDP - regulatory capital shortfall in its second largest lender by June 30. Potential aid could be more comprehensive to cover fiscal requirements, Finance Minister Vassos Shiarly told Reuters.

Newspapers reported that aid could be anything between 6 and 10 billion euros.

Cypriot newspaper Phileleftheros reported that required funds were expected to exceed six billion euros, while the Politis daily said some suggestions put the bailout amount at up to 10 billion euros.
Either way, it would be a massive bill for Cyprus, whose 17.3 billion euro economy is the third smallest in the euro zone after Malta and Estonia.

Cyprus is thought to have applied to the EU for aid after exhausting attempts to secure loans from either China or Russia. Those efforts, however, will be ongoing.

“We will continue efforts to secure a bilateral loan, which can be used accordingly,” government spokesman Stefanos Stefanou said.

The loan amount is expected to cover needs in 2012, but not in 2013, when Cyprus has 2.25 billion euros in refinancing, including a euro medium term note (EMTN) redemption.