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Business

Cyprus seeks early eurozone bank bailout

Cyprus has requested a rescue lifeline from the eurozone bailout fund aimed at helping its stricken financial system. The nation's central bank chief told a German newspaper the funding is needed urgently.

Cyprus' Central Bank Chief Panicos Demetriades told the German business daily Handelsblatt that the eurozone country needs an EU bailout "as quickly as possible" to stabilize its ailing system.

Expressing his "strong hope" for bailout talks to be completed in October, Demetriades said in the interview published Monday that it is "extremely important" that the financial lifeline be provided by January 2013.

In June, the government requested assistance in efforts to shore up its struggling banks, which are hugely exposed to debt-stricken Greek lenders and suffered heavy losses in the wake of its neighbor's debt haircut.

The government in Nicosia has so far kept the exact sum of money its banks need under wraps. But the credit ratings agency Standard & Poor's estimated that the figure could amount to as much as 15 billion euros (about $20 billion).

The funding is to come through a new bailout plan in exchange for a strict austerity program, controlled by the so-called troika of lenders - the European Commission, The European Central Bank and the International Monetary Fund.

The troika reportedly wants to slash the national payroll by 15 percent, cut welfare benefits by 10 percent and roll back state-subsidized housing finance under a program lasting three years.

The central bank chief said, however, that the small Mediterranean nation needs more time.

"A three-year program may probably be not enough," Demetriades said. "We may well need four to five years, before we can return to international capital markets."

uhe/mkg  (Reuters, dpa, AFP)