15 Billion Needed for Banks, Economic Protection - Cassoulides

The state should ask the European Financial Stability Fund (EFSF) for 15 billion euros, the larger part of which will not be used except to protect Cyprus' economy from the negative effects of any further Greek debt writedowns, said DISY MEP Yiannis Cassoulides in comments to state radio.

The five billion euros that might come from Russia will only put off the basic problems in the economy for another year, he said.

Last week, there were reports from Russian media that the Central Bank there is considering a five billion loan to Cyprus. But critics of the idea say that it is not going to be enough to cover the 1.8 billion euros needed for Laiki Bank and the wider needs of the economy.

Cyprus' gross domestic product was valued at 17.6 billion euros last year, and there was a 6.4 percent deficit created by government overspending. The other problems are an ongoing recession; lack of liquidity in the market and lower levels of investor and consumer confidence.

Cyprus has been shut out of international borrowing markets because of high costs after a series of downgrades by international rating agencies.

It has already turned to Russia for a 2.5 billion-euro loan at 4.5 percent interest per year.

The government is also considering applying to the EU for a bailout to cover Laiki Bank's 1.8 billion-euro recapitalisation needs. The bank, along with other Cypriot lenders, is heavily exposed to the Greek market and suffered losses in the billions of euros after the Greek debt haircut.

So far there is no confirmation of either option.

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