Cyprus is very close to receiving financial assistance to support its banking sector. The East Mediterranean country is the fifth member of Eurozone which asks external help, after Greece, Portugal, Ireland and Spain.
Information indicate that the accession of Cyprus to the European Support Mechanism may happen during weekend, but the alternative is the Cyprus issue to be discussed at the scheduled meeting of the Eurogroup on 21st of June in Luxembourg.
The repetition of the scenario of Spain-teleconference on Saturday, June 16 – is not likely, since the day after elections will be held in Greece. However, all the Eurozone countries have been advised to be on call to make emergency teleconference on Sunday evening, after the Greek elections.
EU wants to limit down the financial support for Cyprus at the 1,8 billion euro (the total amount of recapitalization of Laiki Bank). However, Cyprus also has fiscal problems, the deficit (by today’s standards) moves above the target set for 2012, while the country is excluded from the markets since last year.
Cyprus will need at least another 2 billion euros to refinance the debt of public sector.
The Cypriot Finmin said that the EU aid mechanism is one of the government’s choices though no such discussions for Cyprus have taken place.
A potential resort to the aid mechanism will also include Cyprus’ future fiscal needs and not only the banks’ ones. He also said that the timetable for such a move is tight, while a loan from a third country is another possibility.