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02 January 2013

WSJ: Cyprus resists privatising state firms for bailout

Dimitris Christofias, the president of Cyprus, said he would refuse any request by international lenders to sell off state-owned companies as part of an agreement to bail out the crisis-hit country.

A draft of the bailout deal by the rescue creditors—the European Commission, the European Central Bank and the International Monetary Fund—says Cyprus will have to consider privatisations if its debt is deemed unsustainable.

Dimitris Christofias said he won't consent to privatisations because he is "bound" by his party, AKEL, which has communist roots, and by the government. Mr Christofias suggested that should the bailout creditors insist on including privatisations in a deal, the accord would have to wait for the next government to sign it. "I hope that when discussions conclude they won't ask us to privatise state-owned organisations because if they do, and I want to make this perfectly clear, I have no intention to proceed as president of the republic with such a move", he said.

Cypriot banks, which took huge losses on bad Greek debt and loans, are estimated to need as much as €10 billion in rescue money. If the Cypriot government were to spend the full €10 billion for the banks, plus €1.5 billion to cover government deficits over the bailout's four-year duration, public debt would rise as high as 140 per cent of GDP. Cypriot authorities contend that the banks' needs are notably less than €10 billion.

Full article (WSJ subscription required)

© Wall Street Journal

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