Bank of Cyprus

Cyprus forced to find extra €6bn for bailout, leaked analysis shows

by Heather Stewart and Helena Smith, the guardian  |  published on April 14, 2013

Cypriot politicians have reacted with fury to news that the crisis-hit country will be forced to find an extra €6bn (£5bn) to contribute to its own bailout, much of which is expected to come from savers at its struggling banks.

A leaked draft of the updated rescue plan, which emerged late on Wednesday night, revealed that the total bill for the bailout has risen to €23bn, from an original estimate of €17bn, less than a month after the deal was agreed – and the entire extra cost will be imposed on Nicosia.

Visiting Athens, the Cypriot parliament’s president, Yannakis Omirou, said the tiny island nation had been “served poison” by its EU partners.

Cyprus’s politicians had already faced intense domestic political pressure for agreeing to impose hefty losses on savers at two struggling banks to fulfil its eurozone partners’ original demand that they contribute €7bn.

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, the total cost for Cypriot taxpayers and depositors has now been set at €13bn, with €10bn to come from its eurozone partners and the International Monetary Fund. The €23bn overall bill is larger than an entire year’s output from the Cypriot economy.

Jonathan Loynes, of thinktank Capital Economics, said the rising cost echoed the pattern in other bailed-out states. “They don’t know where there might be more black holes: I wouldn’t be that surprised if there were to be another shock in the next week or so,” he said.

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