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EU Endorse 10bn EUR loan
When it comes to the insolvency issues in Cyprus the EU have made fools out of themselves. First came plan a which was met with criticism and scorn. Then came plan b which didn’t work because now more money is required which paints an embarrassing picture of the credibility of the EU and the Eurozone.
The small differential of 6bn EUR represents a small rounding error in the EU budget, and the troika may be endangering the whole Eurozone structure in refusing to grant this extra loan and seemingly to make an example of the Cypriot banking structure. So again Cyprus will have to find the extra money themselves. At this point it’s like getting blood from a stone.
The long suffering uninsured depositors may bear the brunt of this discrepancy again. What’s interesting is that neither the Central Bank in Cyprus nor the Troika have mentioned how much of a haircut the depositors will have to take. They have mentioned a sliding scale but have left the figure open. Just as well as now this sliding scale may move upwards for the Cypriot depositors.
The contribution needed from Cyprus astoundingly has almost doubled over the course of just a few weeks.
Banking controls have still have not been lifted and the feeling there is that this may take a good while longer – quick to implement more difficult to remove. You currently can take 2000 EUR from your account, before it was just 1000 EUROS and you can also now move 300.000 around within the country. Sooner or later the controls will have to be lifted as they are strangling the ability for domestic firms to be able to run themselves
The first slice of the EU pie loan is due in early May in Nicosia. The total of 23bn euros is needed to recapitalize the banks , to redeem mid and long term debt such as loans and to cover other fiscal requirements until 2016.
Of this 23bn EUR:
Eurozone will be providing 9bn EUR
IMF will be providing 1bn EUR EUR
Cyprus will now have to come up with 13bilion Euros.
The 10bn EUR loan will be used for:
2.5bn EUR to recapitalize the remainder of the banking sector which includes a restructure of the Bank of Cyprus (now that the Laiki bank has been closed)
4.1bn EUR on redeeming the mature debt accrued by the government.
3.5bn EUR for the government’s fiscal requirements from 2013-2016.
How does Cyprus intend to raise its 13billion EUR slice of the pie?\
Read here