Cyprus to ask for bailout from eurozone partners (Jun 2012)

eu_bailout_summit

Source: BBC – Cyprus to ask for bailout from eurozone partners

Notable excerpts:

Cyprus has told the European authorities that it intends to apply for financial assistance, the fifth eurozone member to do so.

It said it needs help to shore up its banks, which are heavily exposed to the Greek economy.

Earlier, Spain formally requested a bailout loan for its banking sector, expected to be for up to 100bn euros (£80.2bn, $125bn).

The country needs to find about 1.8bn euros over the next few days to recapitalise its second largest lender, Cyprus Popular Bank.

In a short statement, the government said that it required assistance following “negative spillover effects through its financial sector, due to its large exposure in the Greek economy“.

He said that despite the request, the Cypriot government would continue negotiations for a possible loan from a country outside the EU, such as Russia or China. The country has already borrowed 2.5bn euros from Russia

Its banks have lost large amounts on Greek government bonds. They are also facing big losses on loans made to businesses in Cyprus, which have been hard hit by the deep recession in neighboring Greece, its biggest trading partner.

Credit ratings agency Fitch said the country, which has a population of one million, would need 4bn euros to support its banks, the equivalent of almost a quarter of its GDP, or economic output, last year.

Earlier, it cut the Cypriot government’s credit rating to junk status, making it even harder for the country to raise the funds itself.

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