Demetres Christofias Does Not Exclude Bailout Mechanism for CyprusSource : http://greece.greekreporter.com/2012/06/01/reuters-report-demetres-christofias-does-not-exclude-bailout-mechanism-for-cyprus/
By Areti Kotseli on June 1, 2012 in Cyprus, Economy, News
“Cyprus can’t rule out external support for Greek-ravaged bank,” is an article on Reuters reporting that Cypriot Demetris Christofias, having evaluated the critical financial situation of his country, can’t exclude a bailout package for Cyprus.
Christofias said on Friday he could not rule out that Cyprus might have to enter a financial support mechanism because of the exposure of its banks to debt-crippled Greece, but that it was not a foregone conclusion, reports Reuters.
Economists and some officials on the Mediterranean island have been warning for months that it might be the latest Eurozone member to need support due to problems with banking and the costs of an explosion that knocked out its main power plant last year.
The article explains that Cypriot banks have been hit heavily by exposure to debt-crippled Greece and that its second-largest lender, Cyprus Popular, facing the prospect of nationalization if it does not find new investors by a mid-year deadline.
Asked whether bailing out the bank could in itself force the Eurozone’s third smallest economy to seek support, Christofias said, “I don’t take as a given that we will negotiate entry to a support mechanism, I don’t want to absolutely exclude it.”
The island has been shut out of international financial markets for more than a year, the article points out. It has limited sources of funding and Cyprus Popular would need around a 1.8 billion recapitalization requirement, almost 10 percent of Cypriot GDP.
That bill will likely rise if Greece leaves the Eurozone given the massive exposure of Cypriot banks to Greece.
Christofias said technocrats were asked to look at contingency planning to “deal with a chaotic situation” if Greece does leave the Eurozone. “It is something I hope will never happen,” he said.
Christofias implied that any help from EU partners would focus on the banking sector itself and not the Cypriot people.
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