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04 October 2012

Bloomberg: Cyprus said to seek €11 billion in fifth European bailout

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The Cypriot government will seek an €11 billion bailout, 62 per cent of gross domestic product, to recapitalise its banks and pay its bills.

The country’s banks, which lost more than €4 billion in Greece’s debt restructuring earlier this year, need €5 billion of fresh capital, according to Finance Minister Vassos Shiarly,  three people with direct knowledge of the matter said. The so-called troika that oversees euro area rescues puts Cypriot banks’ recapitalisation needs at about €10 billion, they cited Shiarly as saying.

Cyprus on June 25 became the fifth country in the euro area to seek external aid. No amount was specified for the rescue, which will encompass the public sector as well as banks. Cyprus has also sought a €5 billion loan from Russia. Igor Shuvalov, a first deputy prime minister, said on September 8 that Russia may make a decision on the request within a month.

The Cypriot government also needs €6 billion to redeem debt and close a budget gap through 2015, Shiarly has said, according to the people who declined to be identified because the information hasn’t been made public. Cyprus faces €4.7 billion of bond redemptions in the period

The Cypriot government, which had €492.4 million in the bank at the end of August, faces €751 million of maturing debt through the end of November, according to the Finance Ministry. The government also has monthly outlays for salaries, subsidies and social programs, with a larger year-end wage payment due in December.

Striking a bailout deal with the troika, consisting of officials from the European Commission, ECB and the IMF, is essential for the government to pay its bills through the end of the year.

The Cabinet yesterday approved a counter-proposal to the troika that it plans to discuss with political parties, unions and business groups before bailout talks resume, government spokesman Stefanos Stefanou said.

Full article

© Bloomberg

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