It’s going to cost more to bailout Cyprus than originally projected, with officials now saying the cost will be $30 billion instead of the original estimate of $23 billion.
“It’s a fact the memorandum of November talked about 17.5 billion [euros] in financing needs. And it has emerged this figure has become 23 billion [euros],” government spokesman Christos Stylianides was quoted by the BBC as saying on Thursday.
And a revised assessment of the Cyprus economy from the European Commission is particularly bleak. The island-nation’s economy is projected to shrink by 12.5 percent, according to The New York Times.
That means Cyprus will need to raise nearly twice as much as first thought in order to keep its debt and deficit from spinning out of control and to meet the terms of an international bailout to the tune of $13.1 billion, the Times says.
According to the Times:
“A shrinking economy means the country’s budget deficits are likely to grow, so the government will need to raise more money to keep the deficits within limits set out under its bailout agreement. Because the government has also committed to improving the health of its banks, it must come up with yet more money to ensure that the lenders have adequate capital, particularly critical if their loan losses start to snowball as the economy slumps.
‘In the short run, the economic outlook remains challenging,’ the European Commission said in the report, which details the conditions that the Cypriot government agreed to meet in order to obtain the financial lifeline from the so-called troika: the International Monetary Fund, the European Central Bank and the commission.”