Debt crisis: Cyprus bail-out looms

by Emma Rowley

7:00PM BST 11 Jun 2012

http://www.telegraph.co.uk/finance/financialcrisis/9325290/Debt-crisis-Cyprus-bail-out-looms.html

The island and its financial sector are heavily exposed to the problems in Greece, the recipient of two bail-outs totalling €247bn (£200bn).

Locked out of the debt markets, Cyprus is under pressure to apply for aid to help its second-largest lender. The Cyprus Popular Bank needs €1.8bn (£1.5bn) before a regulatory deadline this month.

“The issue is urgent. We know the recapitalisation of the (island’s) banks must be completed by June 30, and there are a few days left,” said Vassos Shiarly, finance minister, adding he hoped for “good terms” if Cyprus asks for aid.

Spain’s claims of a “no-strings” deal to rescue its banks have stoked hopes in other bailed-out nations that they can secure help on better terms.

In Greece, left-wing party Syrzia said the talks in Europe “open new perspectives for Greece and the eurozone”.

The Irish government argued that Spain “got the exact same deal that we got”, but the Sinn Fein opposition said Irish people “will be asking themselves why is there one set of conditions for us and another for Spain.”

Investors are most worried about a potential bail-out for Italy, as official figures on Monday confirmed the eurozone’s third largest economy shrank by 0.8pc in the first three months of the year.