Cyprus seeks €11.5 billion bailout

The exposure compelled Nicosia in June to request an EU-IMF bailout after its two largest banks, Bank of Cyprus and Cyprus Popular Bank, revealed massive fiscal holes due to Greek debt exposure.

Finance Minister Vassos Shiarly reportedly said on Thursday (4 October) the banks will need another €5 billion in new capital, reports Bloomberg. The troika of the European Commission, IMF and European Central Bank however put the figure closer to €10 billion.

Cypriot President Demetris Christofias has been opposed to any bailout measures that would entail selling off profitable state-owned companies, ending inflation-based pay increases, and abolishing end-of-year bonuses.

Ending all three, says Christofias, would negatively impact a domestic economy that is facing its first full-blown recession in 40 years.

The troika in July put forward a draft economic adjustment plan, leaked to the media last month, that would require the Cypriots to privatise state-owned enterprises.

The commission had also approved in September a 6-month rescue recapitalisation worth €1.8 billion that Cyprus granted to Cyprus Popular Bank for reasons of financial stability.

The Cypriot authorities, in exchange, agreed to submit a restructuring plan for the bank within six months.

But on Wednesday, Christofias reaffirmed his position and told Greek state broadcaster NET in an interview that “we aren't just saying 'no' to them [troika]. We are giving them counter proposals. They are being prepared, we are in the very final stages and will provide for as much in savings as they want.”

The commission, for its part, noted Christofias’ comments was “not against” the financial assistance programme and that “negotiations are still going on.”

The bailout package comes atop a €2.5 billion loan Cyprus secured from Russia last year after the country was forced out of international bond markets due to excessively high interest rates. Cyprus is now asking Moscow for another €5 billion.

The Cypriot finance ministry said the government is also facing €751 million maturing debt through November and some €4.7 billion of bond redemptions up until 2015, reports Bloomberg.

Meanwhile, troika officials are expected back in Cyprus later this month to flesh out the final details of the bailout deal.