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Cyprus bailout cost jumps to $30bn

Island nation may sell its gold to stave off collapse as eurozone ministers meet to discuss EU country's next move.

Last Modified: 11 Apr 2013 22:33
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Cyprus has partly eased capital controls imposed last month to prevent a bank run in a bid to boost business [AFP]

The cost of bailing out Cyprus has surged to 23bn euros ($30bn) and the recession-hit nation is considering selling its gold reserves. 

Estimates in a draft document released by the country's international creditors on Thursday has put the teetering economy in danger of collapse and further endangered big bank deposits.

"It's a fact the memorandum of November talked about 17.5bn [$23bn] in financing needs, and it has emerged this figure has become 23bn," government spokesman Christos Stylianides said.

Cyprus will now have to find 6bn euros ($7.9bn) more than the 7bn euros ($9bn) mooted in a preliminary agreement reached on March 25 to secure an EU-IMF contribution of 10bn euros.

The Mediterranean nation said on Thursday that a sale of its gold reserves was among the options for its contribution
towards an international bailout, but ultimate responsibility rested with its central bank.

Cyprus, which is in line to receive 10bn euros ($13bn) in aid, also partly eased capital controls imposed last month to prevent a bank run in an attempt to boost business activity.

Threshold raised

The island nation allowed bank transactions of up to 300,000 euros ($393,000) domestically, raised the threshold for company payments abroad, and increased the amount that travellers are allowed to take abroad.

Under the preliminary terms of the EU-IMF bailout agreed last month, Cyprus will drastically reduce the size of its bloated banking sector, raise taxes, downsize the public sector workforce and privatise some firms.

Eurozone finance ministers will discuss the new assessment of Cyprus's financing needs in Dublin from Friday in a bid to reach a final deal.

A source close to the talks said that the financing needs of Cyprus had evolved.

"While the restructuring of the financial sector will now be very largely financed through private means, the projected fiscal needs of the state have increased as a result of the deeper-than-expected recession," the source said.

A copy of the assessment obtained by AFP says the European Commission and European Central Bank estimate that "Cyprus's gross financing needs amount to about [23bn euros] over the three-year programme horizon" through the first quarter of 2016.

Slovenia crisis talks

"This includes needs for the recapitalisation of the banking sector, the redemption of maturing medium- and long-term debt, including loans and fiscal needs," the assessment says.

Talks on the financial crisis in Slovenia will be discussed on the sidelines of the meeting of EU finance ministers' meeting in Dublin on Friday, the STA news agency reported.

Uros Cufer, Slovenia's minister for finance, will meet officials from the European Commission, European Central Bank and the ESM bailout fund to discuss the situation in the struggling eurozone nation.

The European Commission warned on Wednesday that Spain and Slovenia posed the biggest economic risks in the eurozone and must quickly tackle excessive imbalances.

But a source told the news agency: "Slovenia is not planning to ask for aid."

STA said that Cufer would give the EC, ECB and ESM officials his government's plans to shore up the country's banking system and stabilise public finances.

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