Cyprus Central Bank Hopes for ESM Aid to Banks
09/16/2012| 08:16pm US/Eastern
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Cyprus is hoping for direct capital injections into its banks from the euro-zone's rescue fund, German daily Handelsblatt reported Monday, citing Panicos Demetriades, governor of the country's central bank. He said Cyprus has a large banking sector that would be overextended without help from the European Stability Mechanism.
"It would be very important for us that the ESM directly recapitalizes our banks from January 2013," he told the newspaper.
He expects an October completion of an aid program assembled by the euro zone and the International Monetary Fund, according to the newspaper. Cypress will need aid from the euro zone and IMF for up to five years, he told the newspaper.
Eurogroup President Jean-Claude Juncker put pressure on Cyprus Friday to conclude a bailout program, after weeks of dithering by the Cypriot government, Dow Jones Newswires reported.
After a meeting with the country's President, Dimitris Christofias, Mr. Juncker said that Cyprus has no time to lose.
"Cyprus and the troika will have to speed up the process. There is no time to lose," he said. "The answers to the problems of this country--and they are very serious--will be found in the coming weeks."
Also present in the meeting was European Central Bank President Mario Draghi
Cyprus's government is expected to begin consultations with unions, political parties and other social partners within the next few weeks, so as to form a program of cutbacks that it will present to international creditors some time next month, according to government sources.
The country has enough cash reserves to cover its financing needs until the end of October or the beginning of November.
Unofficially, Cyprus is expected to need 13 billion euros ($17 billion) to cover its financing needs and the needs of its banking sector.
Dow Jones Newswires; dennis.baker@dowjones.com
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