A 10 billion euros ($13 billion) bailout that hasn’t arrived yet won’t be enough to keep Cyprus’ economy from toppling, despite 7 billion euros ($9.19 billion) the government is raising, and it will have to come up with another 6 billion euros ($7.87 billion) somehow, a report prepared by its lenders has reportedly found.
The document, according to the Associated Press, found that the bailout deal agreed upon by the government last month, which includes confiscating up to 80 percent of bank deposits over 100,000 euros ($130,000) was such a rush job that it severely underestimated how bad off the country’s finances were.
Cyprus will now have to sell 400 million euros ($525.1 million) in gold reserves, renegotiate terms of a loan with Russia and Bank of Cyprus creditors, along with possibility that holders of 1 billion euros ($1.3 billion) in bonds will be forced to a debt swap with a lower return, facing big losses.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) is putting up the rescue package but said that the expected cost of recovery is now about 23 billion euros ($30.2 billion) including the bailout and measures Cyprus has already planned.
The complete winding up of one Cypriot bank, Popular, and the writing-off of a large portion of secured debt and uninsured deposits in the largest bank, Bank of Cyprus, will raise a total of 10.6 billion euros, ($13.9 billion) the document showed.
The news could pose more trouble for newly-elected President Nicos Anastasiades’ government with politicians under intense pressure for agreeing to the plan to confiscate up to 80 percent of bank deposits over 100,000 euros ($130,000) that will hit not only rich foreign account holders but Cypriot businesses and working-class people who put their live savings into state banks and are being left without enough for serious health problems, college loans and their retirement.
A more detailed “debt sustainability analysis” showed that the hole in the island nation’s finances is far deeper than first thought, pushing the bill for taxpayers and depositors at 13 billion euros ($17 billion) instead of 7 billion euros ($9.19 billion) as originally estimated.
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