“My priority in the short-term for 2013 is Cyprus,” Juncker told reporters in Brussels. “It’s a problem one shouldn’t underestimate, because it’s more serious than Greece. This isn’t taken into consideration by the financial markets or the international press.”
Cypriot banks need about 9.3 billion euros ($12.2 billion) in fresh capital, according to a preliminary report by Pacific Investment Management Co., Cypriot broadcaster RIK reported Dec. 9. Another 6 billion euros may be needed to refinance state debt and 1.5 billion euros to cover fiscal deficits, Finance Minister Vassos Shiarly said last month.
That would bring the total to 16.8 billion euros, almost the size of Cyprus’s 17.9 billion-euro economy. The country’s general government gross debt will rise to 89.7 percent of gross domestic product this year, according to the European Commission. That figure does not take into account any aid Cyprus may receive.
“Cyprus’s debt is extremely high and the money they need makes up basically 100 percent of their GDP,” Juncker said in an interview with Bloomberg news agency. “It’s a very serious situation.” President Demetris Christofias said that Cyprus has an agreement in principle with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is rescuing Greece.
The Cyprus deal is expected to be signed after the results of a fiscal examination is ready next month. “The negotiations have been difficult,” said Christofias, who is rejecting the same kind of austerity measures that were imposed in Greece.