Former central banker warns on bailout figures

Former Central Bank of Cyprus Governor Athanasios Orphanides accused his successor, Panicos Demetriades, of endangering the economy by inflating capital shortfalls at the country?s banks amid European bailout talks.

Demetriades told lawmakers that Cypriot banks may need more than 12 billion euros ($14.8 billion) 67 percent of gross domestic product of fresh capital after losing more than 4 billion euros in Greece?s debt restructuring earlier this year.

On June 25, Fitch Ratings Co estimated lenders? capital needs at half that amount.

?Demonizing the banks for political purposes is one thing,? Orphanides told lawmakers on July 27, according to minutes of the meeting obtained by Bloomberg News. ?But it?s quite another to put out numbers that could destroy our country at this point by creating the impression that our debt is unsustainable.?

Cyprus on June 25 became the fifth of the euro area?s 17 member states to seek external aid. Euro-area finance ministers agreed to begin talks on a bailout two days later. [Bloomberg]