Cyprus Crash Fear As Bailout Cost Jumps 31%

Written By Unknown on Jumat, 12 April 2013 | 11.46

The Cypriot government has confirmed that the cost of its EU-IMF bailout has jumped by 31%, putting the already teetering economy in danger of collapse.

Government spokesman Christos Stylianides said: "It's a fact the memorandum of November talked about 17.5bn euros (£14.9bn) in financing needs. And it has emerged this figure has become 23bn euros (£19.6bn)."

The announcement means southern Cyprus will now have to find 6bn euros (£5.1bn) more than the 7bn euros the Nicosia government needed to raise in order to secure the EU-IMF bailout of 10bn euros (£8.5bn).

"Who is responsible for this? How did we get here? It was the fear of responsibility and indecision of the previous government," Mr Stylianides told reporters.

Cyprus has hit affluent bank savers with a massive tax to help secure the earlier agreed EU bailout funds.

But widespread outrage forced the government in southern Cyprus to reconsider its original plan to tax all account holders, instead focusing on those with more than 100,000 euros (£85,000) in accounts.

The bank levy affected many expats and foreign investors, particularly those from Russia.

The two countries share cultural ties through the orthodox Christian religion.

It has also announced plans to bulk sell gold on world markets, forcing Goldman Sachs to downgrade its 2013 price forecast for the precious metal.

Cyprus' sale plan would be the first major gold disposal by a euro area central bank since France sold 17.4 tonnes of gold in the first half of 2009.

"The Cyprus news has damaged gold in the last 24 hours in conjunction with the Goldman gold downgrade and the 17-tonne outflows from the metal's exchange-traded funds," Societe Generale analyst Robin Bhar said.

At current prices, 400m euros' (£340m) worth of gold amounts to 10.36 tonnes of metal.

Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.


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