BRUSSELS (AFP) – Cyprus will ask Russia for a loan of up to 5.0 billion euros ($6.4 billion) this week and then request aid from eurozone partners for its ailing banks, an EU diplomat said Wednesday.
The crisis-hit Mediterranean island will “first try to get a bilateral loan from Russia,” said the diplomat, speaking on condition of anonymity. Cyprus would then probably request eurozone aid for its banks next week along the lines of an offer made to Spain, he said.
The source had no figure for the banking needs, saying Nicosia must conduct a “clear analysis.” Asked for comment, a spokesman for the Cyprus mission to the European Union told AFP: “We are examining all possible options.”
Cyprus,which is taking over the European Union’s rotating presidency as soon as July 1, has already secured a 2.5-billion-euro low-interest loan from Russia to cover its refinancing needs for this year. Estimates are that Cyprus needs around 4.0 billion euros to prop up its banks and help narrow the budget deficit, which widened last year to double the EU ceiling of three percent of gross domestic product (GDP).
The island’s banks are heavily exposed to the troubled Greek economy. The government is already committed to underwriting a 1.8 billion euro capital issue for the island’s worst exposed institution — Cyprus Popular Bank — to recapitalise against the Greek debt crisis. The Cypriot finance minister, Vasos Shiarly, saidTuesday that help could come bilaterally or through the eurozone’s rescue fund, the European Financial Stability Facility (EFSF). “We are optimistic that we can secure funding needed to recapitalise the bank either through a bilateral agreement or from Europe via the EFSF,” he said.