By JUERGEN BAETZ, Associated Press
BRUSSELS (AP) — The cost of bailing out Cyprus has swollen to 23 billion euros ($30 billion), with the crisis-hit country having to take on the lion's share of the measures needed to avoid bankruptcy, according to a draft document by the country's international creditors.
The draft document, obtained by The Associated Press on Thursday, says the country will have to find 13 billion euros ($17 billion) — an increase on the 7 billion euro contribution agreed during the country's chaotic bailout talks last month. The money will be raised by imposing heavy losses on large bank deposits, levying additional taxes, privatizations and a part-sale of the central bank's gold reserves.
"The sheer size of the increase has underlined the extent of the enormous challenges facing Cyprus itself," Jonathan Loynes of Capital Economics said in an analyst note.
The so-called troika of international creditors — the European Commission, the European Central Bank and the International Monetary Fund — are set to grant the Mediterranean island nation 10 billion euros ($13 billion) in rescue loans to recapitalize its shaky banking system and keep the government afloat. For its side of the deal, Cyprus was supposed to contribute 7 billion euros to the rescue.
In the latest draft document, however, the troika has revised the overall cost of bailing out Cyprus amid a gloomier economic outlook for the country, adding an extra 6 billion euros to the bill.
The Cypriot government blamed the gulf between the original total and the new 23 billion euro bill on the previous leftwing administration and the time it took to properly negotiate a bailout — delays which pushed the cost of recapitalizing its banks much higher.
Government spokesman Christos Stylianides accused former President Dimitris Christofias of failing to "take responsibility and complete indecisiveness" in promptly negotiating a bailout.
As part of the original deal, Cyprus agreed to raise the 7 billion euros mostly by overhauling its bloated banking industry and tax increases. This would involve breaking up its second-largest bank, Laiki, and imposing losses on savers who have more than 100,000 euros there and in another lender, the Bank of Cyprus.
The draft creditor document now shows that the troika now expects the break-up of Laiki to raise 10.6 billion euros, which will be used to prop up the Bank of Cyprus.
The document also says Cyprus will have to sell off parts of its gold reserves — raising another 400 million euros in the process — a first for a bailed-out European country.
However, Cyprus Central Bank spokeswoman Aliki Stylianou said that the Central Bank Governing Board "is not considering any such gold sale at this time."
Meanwhile, the Cyprus government moved late Thursday to further loosen restrictions on access to accounts that were imposed last month to forestall a withdrawal rush by fearful savers. The "capital controls" — the first that any country has applied in the eurozone's 14-year history — were put in place when banks reopened March 28th after remaining shut for nearly two weeks until a bailout agreement was finalized.
A new decree that will remain in place for seven days lifts all restrictions on transactions under 300,000 euros to re-energize cash-starved domestic businesses which had difficulty paying suppliers and employees. Moreover, the daily limit on transactions outside of Cyprus not requiring prior approval is raised from 5,000 to 20,000 euros.
However, a daily cash withdrawal limit of 300 euros remains in place, as well as a ban on cashing checks. The decree also introduced a new restriction on opening new accounts in banks where customers had never done business before.
The eurozone's 17 finance ministers are gathering Friday at a meeting in Dublin where, they are expected to discuss a raft of documents spelling out the details of the assistance package for Cyprus.
The measures in the draft document highlight how Europe's financially more stable creditor countries are becoming increasingly impatient with bailing out their southern neighbors and are inflicting harsher terms on those in need of assistance. Cyprus is the fifth eurozone country to receive bailout loans after Greece, Ireland, Portugal and Spain.