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By Catholic Online (NEWS CONSORTIUM)

4/12/2013 (2 years ago)

Catholic Online (www.catholic.org)

Island nation needs to raise 400 million euros to finance bailout

A grim assessment by the European Commission says that the tiny island nation of Cyprus must sell its excess gold in order to raise 400 million euros to finance its bailout. As one of the euro zone's smallest economies, Cyprus has already been forced to wind down one of its largest banks. Losses have also been declared on uninsured deposits in order to qualify for a 10 billion euro lifeline from the European Union and the International Monetary Fund.

According to data from the World Gold Council, Cyprus's total bullion reserves stood at 13.9 tons at the end of February.

According to data from the World Gold Council, Cyprus's total bullion reserves stood at 13.9 tons at the end of February.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

4/12/2013 (2 years ago)

Published in Europe

Keywords: Cyprus, banks, bailout, EU, terms, gold sales


LOS ANGELES, CA (Catholic online) - Street protests have arisen across the country as fears rise over the impact of the crisis. In the meantime, the European Commission's draft assessment has made plans for the sale of some 10 tons of gold, the biggest euro zone bullion sale in four years.

Cyprus would raise 10.6 billion euros from the winding down of Laiki Bank, according to the plan. Losses imposed on junior bondholders and the deposit-for-equity swap for uninsured deposits in the Bank of Cyprus. Nicosia would receive 600 million euros over three years from higher corporate income taxes and a rise in the capital gains tax rate.
 
According to the assessment, of the total Cypriot financing needs of 23 billion euros between the second quarter of 2013 and the first quarter of 2016, the euro zone bailout fund will provide nine billion euros, the International Monetary Fund one billion euros and Cyprus itself will generate 13 billion euros.

According to data from the World Gold Council, Cyprus's total bullion reserves stood at 13.9 tons at the end of February.

The analysis from the EU and IMF predicts the Cypriot economy will contract by 8.7 percent this year, following the bailout designed to put Cyprus back on a stable financial footing.

The crisis won't end there -- the Cyprus economy will go on contracting through 2014, returning to marginal growth of 1.1 percent in 2015. At the same time, debt as a proportion of gross domestic product (GDP) will peak at 126 percent, before falling to 104 percent in 2020, the debt sustainability report shows.

The analysis forecasts the budget deficit to be six percent of GDP this year, 7.9 percent next year, 5.7 percent in 2015 and 2.5 percent in 2016.

Cyprus will be charged a 10-basis-point margin above financing costs for the loans, plus a 50 basis point up-front fee for every disbursement, said the proposal, which will be discussed on Friday by finance ministers of European Union countries at a meeting in Dublin.


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