Cyprus Seeks Financial Bailout
Cyprus confirms it is about to become the fifth country in the ‘Euro Zone’ to ask for a bailout from European authorities. Cypriot banks are heavily exposed to Greek debts and need funds to help shore up their finances in order to have a buoyant future.
The announcement comes during another week of nervousness and concern over the troubled single European currency. Shares in Greece, Italy and Spain took a tumble earlier amid worries over an EU summit this week will fail to produce a deal to mend the faltering currency.
The falls in Spain were further compounded when credit ratings agency Moody’s cut its credit rating on some 28 of Spain’s banks, just a week after it went to European authorities, cap in hand, asking for money to support them. This downgrade is seen by many as a further slap in the face of financial recovery in Spain, where twenty-five per cent of the population is unemployed. Earlier this month the Spanish government's own credit rating was cut to just above junk status, sending the cost of their borrowing soaring to unprecedented levels. Moody’s said in a statement recently that Spain’s much reduced creditworthiness ’implies a weaker credit profile for Spanish banks’.
Cyprus needs to find around 1.8 billion euros over the next few days in order to recapitalize the second largest lender, the Cyprus Popular Bank. The Government said in a brief statement that it needed assistance following ’negative spill-over effects through its financial sector due to the large exposure in the Greek economy.’ A spokesperson confirmed the country would need to negotiate with European authorities as to the exact amount of aid required, and also that the Cypriot government would continue to engage in discussions and negotiations regarding possible loans from a country outside Europe, possibly China or Russia. Such a loan would not be the first for Cyprus, as they have already borrowed around 2.5 billion from Russia.
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