A Presidential Bailout for Cyprus

The second half of 2012 was supposed to be Cyprus’s time to shine. For the first time, the European Union’s third-smallest member state by population, just behind Malta and Luxembourg, is assuming the bloc’s rotating presidency – a perfect opportunity to show off its sandy beaches and get some issues that are close to its heart, such as an integrated maritime policy, on the EU’s agenda. (Two Cypriots were so excited by the EU presidency that they composed and recorded a song to mark the occasion.) “We were preparing for years,” Andreas Mavroyiannis, Cyprus’s deputy minister for European affairs and ambassador to the EU, said Monday, adding that his government viewed its six-month turn at the presidency “as a privilege”. Now of course, the Mediterranean island is in the limelight for something else. Last week Cyprus requested a bailout from the rest of the euro zone and the International Monetary Fund, mostly to support banks that have been hit hard by the Greek crisis. Officials say the country may need as much as €10 billion to recapitalize struggling lenders and finance a budget deficit that hit 6.3% last year, The Wall Street Journal Brussels Beat blog reported. So, just as Cyprus’s president and ministers present themselves to European lawmakers and bureaucrats in Brussels and Strasbourg this week, the troika of debt inspectors from the European Commission, the European Central Bank and the IMF is in Nicosia to scrutinize the government’s finances. For the euro zone, a €10 billion loan would be peanuts, but for Cyprus, a country of just 804,000 people and a gross domestic product of less than €18 billion, it’s big money. Its debt load stands at 72% of gross domestic product. Read more. (Subscription required.)