Cost of Cyprus Bailout Swells to $30 Billion, Leaked Documents Reveal

People at Cyprus atm machine where a European Central Bank "bailout" could take 10 percent of people's savings from their accounts. The island is suffering an economic crisis requiring a bailout by the continental financial institution., a photo by Pan-African News Wire File Photos on Flickr.

Cost of Cyprus bailout swells to $30 billion, leaked document shows

Fri Apr 12, 2013 12:32AM GMT
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The cost of the bailout for Cyprus has swollen to 23 billion euros (30 billion US dollars), with most of the burden on the shoulders of the crisis-hit nation, leaked updated plans for the rescue show.

The draft document says the country will have to find 13 billion euros (17 billion US dollars) to contribute to its own bailout, The Associated Press reported on Thursday.

Cyprus’s contribution to the bailout was previously set at 7 billion euros (9.1 billion US dollars) based on the original cost of the rescue loan package agreed during the country's talks last month with the so-called troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund.

The creditors are set to grant the Mediterranean island nation a 10-billion-euro (13-billion-US dollar) rescue loan package to recapitalize Cyprus's shaky banking system and help the country avoid bankruptcy.

Under the new plan, which is likely to spark fresh public outrage, Cyprus will be forced to impose heavy losses on large bank deposits, levy additional taxes and sell a large portion of the central bank's gold reserves in order to raise the money. The county is also obliged to privatize some state-owned firms.

Analysts are now questioning if Cyprus can raise such a sum as the overall bill is larger than the size of the Cypriot economy, estimated to be only worth about 18 billion euros (23.4 billion US dollars).

"The sheer size of the increase has underlined the extent of the enormous challenges facing Cyprus itself,'' said Jonathan Loynes of Capital Economics in an analyst note.

On March 25, Nicosia inked the bailout deal with the troika, which included a tax of up to 40 percent on deposits of over 100,000 euros in Cyprus’ two biggest banks.

But after a more detailed "debt sustainability analysis" showed that the black hole in the island nation's finances is far deeper than first thought, according to the draft document.

Eurozone and EU finance ministers are gathering Friday at a meeting in Dublin to finalize the details of the assistance package for Cyprus.