Cost of Cyprus Bailout Swells to $30bn
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A leaked draft report by Cyprus’ international creditors shows that the cost of bailing out the island state has swelled to 23 billion euros ($30 billion), larger than the entire year’s output from the country’s economy.
A leaked draft of the updated rescue plan, known as the Debt Sustainability Analysis, revealed that the total bill for the bailout has risen to 23 billion euros, from an original estimate of 17 billion euros, less than a month after the deal was agreed.
A leaked draft report by Cyprus’ international creditors shows that the cost of bailing out the island state has swelled to 23 billion euros ($30 billion), larger than the entire year’s output from the country’s economy.
A leaked draft of the updated rescue plan, known as the Debt Sustainability Analysis, revealed that the total bill for the bailout has risen to 23 billion euros, from an original estimate of 17 billion euros, less than a month after the deal was agreed.
Cyprus will now have to find 6 billion euros more than the 7 billion euros mooted in a preliminary agreement reached on March 25 to secure an EU-IMF contribution of 10 billion euros.
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The entire extra cost will be imposed on Nicosia, much of which is expected to come from savers at its struggling banks.
Visiting Athens, the Cypriot parliament’s president, Yannakis Omirou, said the tiny island nation had been “served poison” by its EU partners.
Analysts are now questioning if Cyprus can raise such a sum. The winding up of one Cypriot bank, Popular, and the writing-off of a large portion of secured debt and uninsured deposits in the largest bank, Bank of Cyprus, is expected raise a total of 10.6 billion euros.
On Thursday, Cyprus confirmed plans to sell part of its gold reserves to raise about 400 million euros to finance part of its international bailout. The eventual decision, however, will lie with its central bank.
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“The sheer size of the increase has underlined the extent of the enormous challenges facing Cyprus itself,” said Jonathan Loynes of Capital Economics in an analyst note.
The Cypriot economy is only worth about 18 billion euros and accounts for less than 0.2 percent of the eurozone total. Many now think the Cypriot economy may shrink by more than 10 percent this year alone, with the government forecasting an economic contraction of 13 percent in 2013.
Related News: Cyprus Economy May Contract By 13 Percent This Year: Government
The EU and eurozone finance ministers will meet in Dublin on Friday for a two-day summit in a bid to finalise the Cyprus bailout.
Ahead of the meetings, Cypriot President Nicos Anastasiades said he will appeal to the EU for “extra assistance”. He did not, however, elaborate on what additional support he was seeking.
