Cyprus Finance Minister Vassos Shiarly said reaching out for a European bailout was one of the options under consideration as it struggles to recapitalize its second-biggest bank.
“The mechanism is one of our choices and we should not demonize it,” Shiarly told reporters in Nicosia today, and added that a loan from a third country was also among Cyprus’s options and could help negotiate better terms.
While “time is pressing,” the government has not begun talks for a financial lifeline that could help the east Mediterranean island bolster Cyprus Popular Bank with at least 1.8 billion euros ($2.3 billion) before June 30, and cover “future needs” of the government. “Few days are left and the issue is therefore included in the government’s priorities.”
Spain became the fourth euro country to seek outside help June 9, asking for 100 billion euros of aid from the euro area to bolster its financial industry.
Cyprus, which is the euro area’s third-smallest economy, has been shut out of markets since May 2011 and has 2.2 billion euros of maturing debt next year. The government aims at cut its deficit from 6.3 percent of the economy last year to 2.5 percent this year.
European Central Bank governing council member and Central Bank of Cyprus governor Panicos Demetriades told lawmakers earlier today that Cyprus’s fiscal situation is not as bad as often presented. “We shouldn’t send the message that our situation is tragic,” he said.