Tuesday 26 June 2012

Cyprus next to fail

Cyprus applies for EU bailout
The Cypriot government has issued a statement, confirming that they have officially made an EU bailout bid. This makes it the fifth state within the currency union to ask for help.

26 June, 2012

The request comes just days before a deadline to recapitalise one of the country’s largest banks.

The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spillover effects through its financial sector, due to its large exposure in the Greek economy,” the government's statement said.

Government spokesman Stefanos Stefanou wouldn't reveal how much Cyprus would ask for from the bailout fund, saying the amount will be subject to negotiations. The 27 EU leaders are meeting in Brussels on Thursday and Friday, where the subject will be discussed.

Analysts estimate the sum would likely be around €5 billion ($6.2 billion) but could go as high as €10 billion ($12.5 billion). It is a fraction of the bailouts given to other EU countries, with the latest sufferer Spain asking for as much as €100 billion ($125 billion)for its banks.

Earlier, US ratings agency Fitch downgraded Cyprus to "junk" status. The move was prompted by the amount of rescue money that would be needed to bail out its banks, which are heavily exposed to the Greek economy.

Cyprus' finance minister Vassos Chiarly recently said he would prefer eurozone assistance rather than aid from Russia, which has already given Cyprus a €2.5 billion loan

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