Cyprus, which became the fifth euro zone country yesterday to seek emergency funding from Brussels, may require a bailout amount worth up to half the size of its economy, Cypriot media reported today.
The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said yesterday it was formally applying for aid from the European Union's rescue funds.
Cyprus needs to plug a €1.8 billion - or 10 per cent of its GDP - regulatory capital shortfall in its second largest lender by June 30.
Potential aid could be more comprehensive to cover fiscal requirements, finance minister Vassos Shiarly said.
Newspapers reported that aid could be anything between €6 and €10 billion.
Cypriot newspaper Phileleftheros reported that required funds were expected to exceed €6 billion, while the Politis daily said some suggestions put the bailout amount at up to €10 billion.
Either way, it would be a massive bill for Cyprus, whose €17.3 billion economy is the third smallest in the euro zone after Malta and Estonia.
Cyprus is thought to have applied to the EU for aid after exhausting attempts to secure loans from either China or Russia.
Those efforts, however, will be ongoing.
"We will continue efforts to secure a bilateral loan, which can be used accordingly," government spokesman Stefanos Stefanou said.
Cyprus has been shut out of international capital markets for more than a year, with yields on its 10 year benchmark bond over 16 per cent yesterday.
Sidestepping EU aid earlier, it secured a €2.5 billion loan from Russia in late 2011.
The loan amount is expected to cover needs in 2012, but not in 2013, when Cyprus has €2.25 billion in refinancing, including a euro medium term note (EMTN) redemption.
President Demetris Christofias, whose administration has been slammed by opposition for dragging its feet in both applying to the EU and taking measures earlier to shore up the island's flagging economy, was to brief politicians later yesterday.
Mr Christofias has been accused by the opposition of being out of touch with reality and ignoring warning signs that the economy was in trouble, suggestions the government strongly denies.
The bailout request comes as Cyprus prepares to assume the rotating EU presidency on July 1st.
"It is a tragic coincidence," Cyprus parliamentary speaker Yiannakis Omirou told state radio.
Reuters
