Eurozone leaders snub Cyprus’ request for new bailout terms
Eurozone officials have no intention of changing the terms of a bailout for Cyprus, rejecting calls by Cypriot President Nicos Anastasiades who had asked for adjustments to be made to the rescue plan.
Cyprus secured €10 billion in emergency loans from the eurozone's bailout fund in April to avoid bankruptcy. The deal involved the closure of the island's second biggest bank, Laiki, and a fundamental restructuring of Bank of Cyprus.
In the letter, sent to euro zone leaders earlier this month, Anastasiades did not explicitly ask for more money but indicated that the Cypriot economy could not cope unless the terms of the rescue package are altered.
"It is my humble submission that the bail-in was implemented without careful preparation," Anastasiades says in the letter, which the Financial Times and Wall Street Journal reported on Tuesday (18 June).
"The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus's turn to seek help."
But EU officials said there was no intention to alter the terms of the loans agreed with Cyprus or to supply more funds. The sources suggested Anastasiades was aware no revision was likely, but wanted to send a message to a domestic audience.
Asked if the terms of the bailout could be changed, one senior EU policymaker said: "No, not as far as I can see."
Eurozone finance ministers will discuss the letter at a meeting in Luxembourg today (20 June).
A second official said: "There's no chance we'll revise the terms of the bailout, but we'll discuss it [at the Luxembourg meeting]."
A third confirmed no change was possible in the short-term, but said there could "potentially" be adjustments in the medium term, as was the case of Greece. However, that also depends on eurozone leaders, who will meet on 27-28 June.
It is the second time Anastasiades has voiced dissatisfaction with the terms of the bailout, which his government negotiated only weeks after being elected.
In early April Anastasiades told reporters in Nicosia he would ask European Commission President José Manuel Barroso and European Council President Herman Van Rompuy for extra assistance given the bad economic situation of the island.
EU officials clarified later that the discussion concerned the early use of EU structural funds, money from the EU budget to help development in member states, allotted to Cyprus in the next 7-year budget to help boost growth.
The Cypriot banking sector got into trouble mainly because it lost €4 billion, or 22% of Cypriot GDP, on the restructuring of Greek sovereign debt last year, which itself was a condition for a second emergency loan package from the eurozone to Greece.
Under the bailout deal, Cyprus Popular Bank will be closed and its guaranteed deposits of up to €100,000 transferred to the biggest bank, Bank of Cyprus.
Deposits of more than €100,000 at both banks, too big to enjoy a state guarantee, will be frozen, and some of those funds will be exchanged for shares issued by the banks to recapitalise them.
The big depositors will lose money, but the authorities say deposits up to €100,000 will be protected, a reversal from an earlier plan that would have hit small depositors as well but was vetoed by Cyprus's parliament earlier in March.