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Monday 11.12.2017 | Name days: Valdis, Voldemārs, Valdemārs

Eurozone finance ministers discuss crisis in Cyprus

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Author: AFP/SCANPIX

Eurozone finance ministers meet on Friday, April 12, to finalise a bailout for Cyprus amid news that the country needs much more money than first thought.

The cost of the rescue has risen to 23bn euros ($30bn; £19.5bn) from 17.5bn euros, according to Cyprus’ creditors.

In order to secure 10bn euros from the EU and International Monetary Fund (IMF), Cyprus will have to find the remaining 13bn euros, about 6bn euros more than previously thought, BBC reported.

Late on Thursday, a Cypriot government spokesman confirmed that one fundraising option being considered was the sale of some of the country’s gold reserves.

Analysts said the increase in the cost of the bailout meant Cyprus faced huge new challenges.

Jonathan Loynes, chief European economist at Capital Economics, said that the “biggest burden of the increase in the bailout will fall on depositors and bank bond-holders, whose combined contribution will rise from an expected 5.8bn euros to 10.6bn euros.”

Under bailout terms agreed in March, depositors with more than 100,000 euros in savings will bear part of the cost of the rescue.

The bank sector on which much of the Cypriot economy was dependent is shrinking, and thousands of jobs are being lost. Laiki Bank is being wound up and its healthy assets transferred to the Bank of Cyprus.

Late on Thursday Cyprus relaxed restrictions imposed last month on access to accounts in order to head off a run on banks.

A new decree that will remain in place for seven days lifts all restrictions on transactions under 300,000 euros, a move aimed at helping cash-starved domestic businesses which had difficulty paying suppliers and employees.

Also, the daily limit on transactions outside of Cyprus not requiring prior approval is raised from 5,000 to 20,000 euros.

However, the daily cash withdrawal limit of 300 euros stays in place.

Meanwhile, eurozone officials at the meeting are also due to review Slovenia’s growing problems.

There will be no discussion at the formal meeting of finance ministers, and the country will not make an application for bailout funds. But Slovenia’s finance minister, Uros Cufer, is expected to present to EU and European Central Bank officials his plan to shore up the country’s finances.

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