Cyprus could become the fourth eurozone country to be asking for a bailout. Its Popular Bank needs a huge sum for recapitalization by the end of June, and Nicosia hasn't said where it will come from.
The Cyprus Popular Bank as the second biggest lender on the island needs another 1.8 billion euros ($2.23 billion) until July to meet new recapitalization requirements, the director of Cyprus' central bank, Panicos Demetriades, told the Monday edition of the Financial Times.
It's highly uncertain whether the government in Nicosia will be able to come up with the money. "The closer we get to the deadline, the bigger is the likelihood of Cyprus having to ask Brussels for help," Demetriades commented.
Cyprus may thus become the fourth eurozone candidate for an international bailout, following in the footsteps of Greece, Portugal and Ireland, and reflecting Spain's precarious situation at the moment.
Neighboring Greece part of the problem
Cyprus Popular Bank has been the country's lender most exposed to toxic Greek debt. The cash-strapped government has said it's willing to give financial support to the bank, but has so far failed to elaborate on what exactly it can do.
In audited results in April, Popular revised its losses upwards to 3.65 billion euros due to a write-down of Greek sovereign bonds. The economy in Cyprus has been struggling with recession and low domestic demand. Nicosia is expected to announce more austerity measures soon in a bid to keep the public deficit below 2.5 percent this year.
Getting sufficient loans abroad to rescue Popular seems an unlikely option for the government after two major rating agencies downgraded Cyprys' bonds to junk status.
Despite the difficulties at hand, the European Commission believes no bailout scheme will be required for the island. "We are confident that Cyprus will master the challenges on its own," the Commission said in a statement on Monday.
hg/gsw (dpa, dapd, AFP)