One Cyprus Bank Could Get Government Bailout - FM

One Cypriot bank could be a candidate for a 1.5 billion-euro bailout from the government, said Finance Minister Vasos Sharly in comments reported by Cyprus News Agency.

Although Sharly did not confirm the name of the bank, it is common knowledge that the hardest-hit among the top three banks here is Laiki Bank, which lost 2.5 billion euros on its Greek debt exposure in 2011.

However, Bank of Cyprus also sustained significant 2011 losses, ending up with a 1.01 billion-euro loss on its Greek bond holdings after a private sector write-down agreed with the Greece. Sharly did not specify where the bail-out money would come from, which raises questions because Cyprus has not had access to international finance markets for some time after a series of rating agency downgrades negatively impacted its borrowing power.

In other developments, Sharly said he would taking more measures to reduce government spending and the deficit. According to his latest comments, the fiscal deficit dropped to 0.8 percent in the first quarter of 2012, compared to 1.8 percent in the same period last year.

Parliament passed a number of austerity measures at the end of 2011 to try and avoid entering European bailout mechanisms.

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