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South Cyprus bailout figure rockets

12 April 2013

It now appears that the South Cyprus bailout figure falls far short of that which was originally calculated.

The cost of the bailout has rocketed to 23 billion euro from 17.5 billion euro. This will almost certainly mean a bigger levy on bank deposits.

EU Finance Ministers are meeting in Dublin today to arrange an agreement on the Memorandum of Understanding (bailout agreement) with Cyprus.

Jonathan Loynes, chief European economist at Capital Economics, said that the “biggest burden of the increase in the bailout will fall on depositors and bank bond-holders, whose combined contribution will rise from an expected 5.8bn euros to 10.6bn euros.

Under bailout terms agreed in March, depositors with more than 100,000 euro in savings will bear part of the bailout burden.

Spokesman Christos Stylianides accused former President Dimitris Christofias of failing to “take responsibility, and complete indecisiveness” in promptly negotiating a bailout.

The bank sector which drove most of South Cyprus’ economy is shrinking, and thousands of jobs are being lost.

The final decision is expected at the end of April with funds being supplied in the first two weeks of May, says a Eurozone official.

The Memorandum has not been finalised, however, once the political decision has been taken, the ratification process will begin in the parliaments of members of the Eurozone.

A statement on behalf of the Eurogroup is expected around lunchtime.

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