Cyprus About to Ask Euro Zone for Bank Help: EU Source
Paris. Cyprus will ask euro zone partners on Monday for financial help to prop up the island’s banking system, a European diplomatic source said on Monday.
The formal application was expected within a matter of hours, the source said.
A spokesman for the European Commission, Amadeu Altafaj, told a press conference in Brussels that so far he was not aware of the application by Cyprus.
The permanent Cypriot representation office in Brussels declined to comment directly on when the request would be made, telling AFP: “We are examining all possibilities,” mentioning bilateral loans or a request for help restricted to the banking sector.
Last week, a European diplomatic source in Brussels said that Cyprus would ask the euro zone, probably this week, for help with its banks.
The Cypriot government did not confirm this, but indicated that if it did ask for help, it would do so before the end of June.
That is the same date that the second-biggest bank in Cyprus, Popular Marfin Bank, must raise 1.8 billion euros ($2.25 billion) needed for recapitalization.
Nicosia also seems likely to ask Moscow to lend it 3-5 billion euros.
The support from the euro zone, which could be along the same lines used for a rescue for Spanish banks, could also have a price tag of 3-5 billion euros.
The credit rating agency Fitch downgraded debt issued by the Republic of Cyprus from “BBB minus” to the speculative status of “BB plus” on Monday, owing the shift to increasing concerns about the Cypriot banking system.
Standard & Poor’s had made a similar rating change in January, and Moody’s on June 13.