Cyprus paved the way for a bailout of its own yesterday with time fast running out for the country to prop up its struggling banking sector.
The country is up against a regulatory deadline to recapitalise Cyprus Popular Bank (CPB), which has been bowed by its exposure to debt-crippled Greece. CPB has been looking for an investor willing to fill a €1.8bn (£1.5bn) capital shortfall within three weeks, or it will call on the government to fill the gap.
The Finance Minister, Vassos Shiarly, said: "The issue is urgent. We only have until 30 June."
Cash-strapped Cyprus, which has been shut out of financial markets for a year and is running deficits, will need to borrow the equivalent of 10 per cent of its gross domestic product just to prop up CPB.
Mr Shiarly refused to speculate on the size of the potential aid package but the country has just over €2bn short-term debt maturing next year.
Cyprus assumes the rotating European Union presidency for six months the day after the looming bailout.
Mr Shiarly said: "When one applies to the support mechanism you take into account all the facts, including needs which may arise in coming periods. So it would be a comprehensive request."
The nation could apply for a rescue next weekend, when the focus will be on the Greek election, or on 23-24 June, but they have so far been spooked by the experience of Greece and worried that pressure could be applied to change its tax regime, one of the lowest in the EU.
The nation is negotiating separately with a third country – thought to be China – in the hope that it could secure better bailout terms from its EU partners. Cyprus received a €2.5bn bilateral loan from Russia late last year, sidestepping the EU.Reuse content