Financial News

Eurozone problems drone on as Cyprus seeks bail out

Cyprus is the fifth eurozone nation to put out the begging bowl for an emergency bank bail-out.

The Mediterranean island’s government is seeking €10 billion euros to shore up ailing banks that are heavily exposed to debts in ally and trading partner Greece.

The borrowing amounts to an equivalent of half the island’s annual economic output.

In recent months, Cyprus has already borrowed €2.5 billion from Russia as financial problems started to bite.

Cyprus is about to assume the rotating role of European Union presidency.

Jean-Claude Juncker, head of the Eurogroup of eurozone finance ministers, welcomed the Cypriot application but explained he expected the government to act with “strong determination” to carry out the economic measures required for a bailout.

Meanwhile, the eurozone’s woes continue to pile up as Spain was hit by a double financial whammy.

First, 28 banks were slammed with credit downgrades by credit rating agency Moody’s just a day after the government asked the eurozone to give up to €125 billion to the banks which are carrying vast amounts of bad loans on their balance sheets.

No one yet knows the full extent of the borrowing required to refloat the banks as auditors scrutinise their books.

Moody’s said the rate cut was necessary as the banks face rising losses from commercial real estate loans, adding that the government’s own lowered credit rating made matters worse.

Spain’s lower creditworthiness “not only affects the government’s ability to support the banks, but also weighs on banks’ stand-alone credit profiles,” said Moody’s.

“But we view positively the broad-based support measures being introduced by the Spanish government to support the banking system as a whole”.

Eurozone leaders are expected to meet within a few days to discuss more measures to try to save the single currency.

Leave a Comment