A planned aid package for Cyprus is being delayed by the government’s differences with the International Monetary Fund over Cypriot banks’ capital needs, President Dimitris Christofias said on Tuesday.
“The problem of the banks has completely overturned the apple cart,” Christofias told reporters in Strasbourg, France. “The IMF believes that our needs are maximum needs. We believe that they are lower. We are now awaiting clarification of the situation so that we can confirm finally what the exact figure is.”
Cyprus has been negotiating with the IMF and the euro area for seven months over the size and terms of a rescue for the government and lenders weakened by their exposure to the Greek economy. Cypriot financial institutions such as Bank of Cyprus Plc and Cyprus Popular Bank Pcl lost more than 4 billion euros in a Greek debt restructuring.
After commissioning Pacific Investment Management Co to determine how much banks in Cyprus need, the Cypriot government hired BlackRock Inc to assess Pimco’s methodology.
An initial draft of Pimco’s report led Cypriot central bank chief Panicos Demetriades to estimate that the rescue of banks in Cyprus may cost as much as 10 billion euros. The final figure is scheduled to be published around the end of this week. [Bloomberg]