Anastasiades tackles Cyprus bailout

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iol news pic Cyprus Election~8 AP Newly-elected Cyprus' president Nicos Anastasiades waves to his supporters at Elephteria stadium in capital Nicosia, Cyprus. (AP Photo/Petros Karadjias)

Nicosia - Cypriot president-elect Nicos Anastasiades, armed with a clear mandate from voters to protect the island from insolvency, said on Monday he was committed to reforms in return for a bailout.

The Conservative Anastasiades won decisive backing in a presidential election on Sunday for an aggressive approach to resolving the island's worst financial crisis in four decades.

Anastasiades has promised a quick deal with foreign lenders and to bring Cyprus closer to Europe, in a shift from the policies of the outgoing Communist government that first sought aid from Russia before turning to the European Union.

“Long term prospects for Cyprus are excellent as we are committed to carrying out necessary structural reforms. We only need a helping hand now,” Anastasiades told Germany's best-selling daily Bild, according to advance excerpts of an interview to be published in Tuesday's edition.

Anastasiades, who says he will form a unity government, held consultations on Monday with the Democratic Party, a centrist party which supported his bid for the presidency.

There were persistent reports Michael Sarris, a former finance minister who successfully ushered Cyprus into the euro zone in 2008, would be appointed.

Eight months of talks on a bailout package have turned Cyprus, one of the euro zone's smallest economies, into a big headache for the euro zone, triggering fears of a financial collapse that could reignite the bloc's debt crisis.

Anastasiades will be sworn in on Feb. 28, and fully assume duties on March 1. With state funds depleting rapidly and a 1.4 billion euro ($1.9 billion) debt maturing in June, he has little time.

In a joint statement on Monday, the French and German finance ministers said talks must begin with prospective lenders soon so a deal can be reached by the end of March. .

Cyprus sought aid from the EU and the IMF last June, after a Greek sovereign debt restructuring saddled Cypriot banks with losses. It is expected to need up to 17 billion euros in aid - about the size of its entire economy.

“There is a pressing need to recapitalise our banking sector,” said Anastasiades in the Bild interview. “I agree with Germany and France that we should reach an agreement by March.”

Virtually all rescue options - from a bailout loan to a debt writedown or slapping losses on bank depositors - are proving unpalatable because they push Cypriot debt to unmanageable levels or risk hurting investor sentiment elsewhere in the bloc.

Although a draft bailout deal says banks may need “up to” 10 billion euros to recapitalise, a banking source said an asset review still under wraps has earmarked between 5.98 billion and 8.86 billion euros for banks.

With Cyprus's fiscal needs at 7.0 to 7.5 billion over the next four years, the final bailout could reach 16 billion euros.

German misgivings about Cyprus's commitment to fighting money laundering and its strong financial ties with Russia - which has already extended a 2.5 billion euro loan to the nation - have further complicated negotiations.

Known for his no-nonsense style and impressive access to European policymakers such as German Chancellor Angela Merkel, Anastasiades took 57.5 percent of the vote in the run-off election, 15 points ahead of his anti-austerity Communist-backed rival Stavros Malas.

“Money laundering is a global problem and no country can remain immune to this problem. However I believe the comments about Cyprus are wrong and exaggerated. We have gone through proper checks,” Anastasiades said.

The island was ready to agree to further inspections by international or European committees and take on board proposals for improvement, he said.

Cyprus has been shut out of international capital markets for almost two years, with the outgoing administration resorting to heavy borrowing from state-owned corporations to pay public sector salaries.

Yet prices on the island's internationally traded bonds have rallied in recent weeks. The quoted yield on a Cypriot 10-year benchmark bond has fallen to an 18-month low of 9.45 percent, according to Thomson Reuters data. - Reuters


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