Juncker Says Cyprus Bailout Needed Now

With talks over a bailout for Cyprus going on for months, former Eurozone chief Jean-Claude Juncker said that a deal must be reached almost immediately because the island’s government is nearly bankrupt because of its banks large expose to devalued Greek bonds.
The 17 finance ministers of the Eurogroup are meeting on March 15 to try to reach a resolution with Cyprus’ new administration of President Nicos Anastasiades.  “The Cyprus question should not just be brought closer to a solution – it should be solved,” the Luxembourg Prime Minister Juncker told reporters in the early hours at the close of a summit of Eurozone leaders held in the middle of a two-day European Union summit.
Asked if he foresaw a deal being reached at the finance talks after the EU meeting ends, the recently-departed Eurogroup Chairman said: “I can’t imagine that we would let the weekend pass without having solved the Cyprus problem.”
Amid calls for Cypriot banks to write down some of their debt, similar to the way Greek banks accepted a massive haircut, Juncker maintained that Cyprus — whose banks suffered through close links to the Greek financial system – is a different case. “We need to look for a solution that is not a blunt haircut,” Juncker said, although he added that the bailout when it is done must deliver “the same results,” according to Agence-France-Presse.
A loan bailout initially set at 17 billion euros ($22.2 billion) — roughly the same as the island’s annual economic output — has caused concerns within the International Monetary Fund, whose Managing Director Christine Lagarde will also attend the talks. The IMF, along with the European Union and European Central Bank make up the Troika that would put up the rescue funds as it has for Greece.
There were some reports the bailout could be as little as 10 billion euros ($13 billion) but there are still fears that a sizeable bailout could increase the  government’s debt to more than 140 percent of Gross Domestic Product (GDP), a level considered unsustainable in the long run.
Debate has focused on a compulsory reduction, or haircut, on deposits in local banks to cut the overall cost of the rescue but the government said that would be devastating, not just for Cyprus but for the entire 17 state euro currency area.
Cyprus first requested financial aid in June last year. “I do hope that by tomorrow we can negotiate and find a solution,” Anastasiades said on the sidelines of the EU summit, although he did not comment as he left the Eurozone talks.