Cyprus Will Be Fifth to Ask for Bailout

Also asks Russia for loan of 5 billion euros

Cyprus is set to become the fifth eurozone country to ask for a bailout, according to sources familiar with the situation, and has already asked Russia for a loan.

Bloomberg reported Thursday that sources said the Cypriot government is looking for a rescue package of 11 billion euros ($14.2 billion), which amounts to 62% of the country’s GDP. Greece’s restructuring caused the country’s banks to lose more than 4 billion euros; now Finance Minister Vassos Shiarly says the banks need 5 billion euros in new capital.

He was cited as saying that the troika of the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF) put the total need of the country’s bank recapitalization at around 10 billion euros.

In the report, Shiarly said, “As we are in continual discussions with troika team, you appreciate that, as we have maintained throughout the discussion period, we are unable to comment on the recapitalization figures. However, regarding to the government’s overall financing and refinancing until January 2016, we confirm that the said figure is approximately correct.”

While the country actually became the fifth in the region to ask for assistance on June 25, no amount was specified at the time. Help is needed for both the banks and the country’s public sector. Cyprus has also asked Russia to lend it 5 billion euros, and Igor Shuvalov, a first deputy prime minister, said on Sept. 8 that the decision could come within a month.

Shiarly has said that the government also needs 6 billion euros to redeem debt and close a budget gap through 2015. According to the country’s finance ministry, 751 million euros in debt will mature through the end of November. At the end of August, the country had only 492.4 million euros in the bank, and of course it is still obligated for payments each month of salaries, subsidies and social programs. In addition, there is a larger year-end wage payment due in December.

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