Demetris Christofias: Cypriot Economic Trouble Rooted in Greek Woes

Cyprus President Demetris Christofias on Sunday blamed the island’s economic troubles on neighbouring Greece’s woes and insisted that reforms by his government would check a growing public deficit.
“The economy of Cyprus continues to have healthy foundations despite the problems, distortions and inequalities accumulated over the years,” the Communist politician told To Vima weekly in an interview.
Cyprus takes over the European Union’s rotating presidency on July 1st.  Estimates predict that it needs approximately 4.0 billion euros to prop up its banks and help narrow the budget deficit, which widened last year to double the EU ceiling of three per cent of gross domestic product (GDP).

“Cyprus is facing the prospect of entering (a rescue) mechanism not because of the fiscal state of the economy, but because of the need to recapitalise Cypriot banks which have important exposure to the Greek economy,” Christofias said.  “In every downgrade of the Cypriot economy, the exposure of our banks to Greece is portrayed as the main cause,” he said.
Christofias said reforms already undertaken would bring the deficit to “around 3.0 per cent” from 6.5 per cent in 2011, with the aim of trimming it further to “as close to 2.5 per cent as possible.”  Cyprus will ask Russia for a loan of up to 5.0 billion euros ($6.4 billion) this week and then request aid from eurozone partners for its ailing banks, an EU diplomat said Wednesday.
The crisis-hit Mediterranean island will “first try to get a bilateral loan from Russia,” stated the diplomat, speaking on condition of anonymity.
Cyprus would then probably request eurozone aid for its banks next week along the lines of an offer made to Spain, he said.
(source: To Vima, AFP)