Economy Sinking, Cyprus Seeks $14 Billion Bailout

Unable to pay its bills and needing to recapitalize its banks, Cyprus will ask international lenders for an11 billion euros, or $14.2 billion bailout, the news agency Reuters reported, citing three sources with knowledge of the request.
The country’s banks, which lost more than 4 billion euros ($5.18 billion) when a previous Greek government imposed 74 percent losses on investors, are on the edge of insolvency and need cash fast, and could need as much as $12.95 billion, Finance Minister Vassos Shiarly reportedly said.
Cyprus will have to get the funding from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up $325 billion in two bailouts for Greece, but that came with conditions of strict austerity that Cyprus is hoping to avoid.
“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,” Shiarly told the Bloomberg news agency in an e-mailed statement. “However, regarding to the government’s overall financing and refinancing until January 2016, we confirm that the said figure is approximately correct.”
Cyprus on June 25 became the fifth country in the euro area to seek external aid. No amount was specified for the rescue, which will encompass the public sector as well as banks. Cyprus has also sought a 5 billion euros ($6.47 billion) loan from Russia. Igor Shuvalov, a First Deputy Prime Minister, said on Sept. 8 that Russia was ready to make a decision within a month, a deadline that ends days from now.
The Cypriot government also needs 6 billion euros ($7.77 billion) to redeem debt and close a budget gap through 2015, Shiarly has said, according to the people who declined to be identified because the information hasn’t been made public. Cyprus faces 4.7 billion euros ($6.08 billion) of bond redemptions in the period, according to data compiled by Bloomberg.
The Cypriot government, which had 492.4 million euros ($637.75 million) in the bank at the end of August, faces 751 million euros ($972.69 million) of maturing debt through the end of November, according to the Finance Ministry. The government also has monthly outlays for salaries, subsidies and social programs, with a larger year-end wage payment due in December.
Shiarly reportedly said that without the bailout from the Troika that Cyprus – like Greece – won’t be able to pay its workers or pensioners. The Cabinet has approved a counter-proposal to the Troika that it plans to discuss with political parties, unions and business groups before bailout talks resume, government spokesman Stefanos Stefanou said without elaborating.
Shiarly told reporters that Cyprus may receive the first installment of aid at the end of December if the terms of the bailout are approved by euro-area finance chiefs by mid- November. No date has been set for reopening talks with the troika, he said. Cyprus has been shut out of markets since May 2011.