Debt crisis: EU is the least worst option for Cyprus

26 June 2012 – Presseurop O Phileleftheros, Politis

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On 25 June, Cyprus submitted an official request for EU financial aid, and, as the O Phileftherosheadline points out, the island can now count on “the complete package including the memorandum.”

According to the daily, Nicosia could obtain as much as 10 billion euros to finance the state and recapitalise the country’s banks, which have been hard hit by the Greek crisis. But the request for assistance from its European partners and the IMF also implies that the country will be subject to supervision from the troika, and will have to contend with the many concessions it could demand in exchange.

This is why the request, which has been expected for several days, was so long in coming. Demetris Cristofias’ government initially attempted “to exhaust all of the other possible rescue options for the country, which did not involve recourse to the EU support mechanism,” explains Politis. In particular, it tried to obtain loans from both Russia and China, but these “would have required a 4% rate of interest, whereas Europe will provide funding at 2%.”

Furthermore, the newspaper points out that the country’s bid to obtain support from Moscow and Beijing was perceived as a defiant gesture by the EU — all the more so because Cyprus is currently preparing to assume the rotating presidency of the European Union on 1st July. “We had to acknowledge the size of our debt — 14 billion — and the fact that it was the only solution,” concludes Politis.

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