Cost of bailing out Cyprus swells to 23bn euros

PanARMENIAN.Net - The cost of bailing out Cyprus has swollen to euro 23 billion ($30 billion), with the crisis-hit country having to take on the lion's share of the measures needed to avoid bankruptcy, according to a draft document by the country's international creditors.

The draft document, obtained by The Associated Press Thursday, April 11, says the country will have to find 13 billion euros ($17 billion) — an increase on the 7 billion euro contribution agreed during the country's chaotic bailout talks last month. The money will be raised by imposing heavy losses on large bank deposits, levying additional taxes, privatizations and a part-sale of the central bank's gold reserves.

The so-called troika of international creditors — the European Commission, the European Central Bank and the International Monetary Fund — are set to grant the Mediterranean island nation a 10 billion euros ($13 billion) rescue loan package to recapitalize Cyprus's shaky banking system and keep the government afloat.

As part of the original deal, Cyprus agreed to overhaul its bloated banking industry by breaking up its second-largest bank, Laiki, and imposing losses on savers who have more than 100,000 euros in another lender, the Bank of Cyprus.

In the latest draft document, the troika has revised the cost of bailing out Cyprus amid a gloomier economic outlook, adding an extra 6 billion euros to the bill.

The document also shows that the troika expects the break-up of Laiki to raise 10.6 billion euros. Those funds will be used to prop up the Bank of Cyprus, the AP says.

Cyprus will also have to sell off parts of its gold reserves — a measure that is expected to net another 400 million euros — a first for a bailed-out European country.

The measures in the draft document highlight how Europe's financially more stable creditor countries are becoming increasingly impatient with bailing out their southern neighbors and are inflicting harsher terms on countries in need of assistance. Cyprus is the fifth eurozone country to receive bailout loans.

The eurozone's 17 finance ministers are gathering Friday at a meeting in Dublin where, they are expected to discuss the documents spelling out the details of the assistance package for Cyprus.