Greek Cyprus sees chance of bailout

Greek Cyprus sees chance of bailout

NICOSIA - The Associated Press
Greek Cyprus looks increasingly likely to have to ask for EU bailout money to help rescue its troubled banking sector, the island’s Central Bank governor has said.

Panicos Demetriades said Greek Cyprus, which is part of the 17-country eurozone, is struggling to find 1.8 billion euros ($2.23 billion) to inject in the second-largest lender, Cyprus Popular Bank, by a June 30 deadline.

“Clearly, the closer you get to the deadline, the less unlikely (asking for EU bailout money) becomes,” Demetriades told the Financial Times in an interview.

The bank is the most exposed to Greek debt and suffered huge losses after writing down the value of its Greek government bond holdings.

The government last month underwrote 1.8 billion euros equity issue to help the bank raise capital from private investors, meaning it will have to put up the cash itself -- an amount equal to a tenth of the island’s entire economy -- if the bank cannot find the money.

However, state coffers are running dry because Cyprus is unable to borrow from international markets, after two of the world’s top three credit ratings agencies downgraded the island’s creditworthiness to junk status. Cyprus is relying on a Russian loan just to pay its bills this year.

The chairman of Cyprus Popular Bank, Michalis Sarris, also suggested that an EU loan now seemed more likely.

“It’s hard to see where [the capitalization] is coming from, if not Europe,” he told the Financial Times.
Demetriades said it could still be possible to recapitalize Cyprus Popular Bank through private money or a loan from another country.