EU pressing Cyprus to take €10bn aid as island seeks loan from Russia
EUROPEAN authorities are pushing Cyprus to take a full bailout package worth as much as €10bn, resisting the country's attempt to limit any aid to its banking system, two officials said.
Bargaining with Cyprus, which is also pursuing a loan from Russia, will continue tomorrow when eurozone finance ministers grapple with salvaging Spain's banking system and a possible relaxation of Greek aid terms. If the Russian loan comes through, the country could use that agreement to improve its bargaining position with its EU partners.
"We have to obtain financing to recapitalise the banks; this is unavoidable," Finance Minister Vassos Shiarly told reporters in Nicosia. If eurozone cash comes with too many strings attached, Cyprus will have other options, he said.
"Your negotiating position in talks with the European Union is much better when you have a bilateral loan already approved."
Cyprus is angling for banking assistance to escape the oversight required in the programmes granted to Greece, Ireland and Portugal, said the EU officials who asked not to be named because the talks are private. Cyprus would be the fifth state to take a financial lifeline, since Spain is already in talks for a rescue limited to its banks.
The Russian Finance Ministry hasn't received an official loan request from Cyprus, a spokesperson said. Cyprus also hasn't yet put in a bid for eurozone aid.
Cyprus defied EU pressure to make a request before the Greek election on June 17, one of the officials said.
The European Central Bank and EU Commission want to link any request with the intrusive oversight since the sums under consideration would surpass half of Cyprus's €18bn GDP, dwarfing the size of previous packages, the officials said.
Mr Shiarly said EU aid would come with conditions, probably including implementation of the commission's recent recommendations to overhaul the Cypriot economy.
Pavel Medvedev, an adviser to Bank Rossii chairman Sergey Ignatiev, said he "wouldn't be surprised" if Russia extended a second loan to Cyprus in as many years. Last December, Russia lent €2.5bn to the island nation. The government needs about €6bn for the banks, which have been hit by losses in Greece, Michael Sarris, chairman of Cyprus Popular Bank Pcl, said. (Bloomberg)