Cyprus claims EU mood shifting toward bailout

[February 28, 2013]  NICOSIA, Cyprus (AP) -- Wariness among some euro area countries over bailing out debt-saddled Cyprus is gradually receding, the country's president-elect said Wednesday.

Nicos Anastasiades said his government will move quickly to counter allegations that Cyprus is a haven for money-laundering so that it can secure full support for a financial lifeline that the country needs to stay afloat.

"It's something that without doubt must be done to eliminate all these reactions," Anastasiades said after naming his new Cabinet. "Consequently, the assurances I've received are that we will have the full solidarity of our European partners."

Tiny Cyprus, whose economy only contributes 0.2 percent to the output of the group of 17 European Union countries that use the euro, last year asked for a euro17 billion ($22.3 billion) bailout to stave off bankruptcy and rescue its banks which have lost billions on bad Greek debt. The sum is equal to the value of the country's economy, raising questions whether it will be able to repay any loan.

It has also been accused -- mainly by Germany -- that it launders dodgy Russian money and that it's simply too small and not worth saving. But Cypriot and European officials have warned letting the country fall would jeopardise the euro area's fragile recovery.

Conservative Anastasiades, 66, easily defeated his left-wing opponent in a runoff Sunday, promising to quickly secure a rescue loan and end the uncertainty dragging the Cypriot economy down.

Cyprus only has enough money to pay salaries until the end of May, outgoing Finance Minister Vassos Shiarly said Wednesday, while the country has about euro1.4 billion ($1.83 billion) worth of debt maturing in early June.

The country's economy is projected to shrink by 3.5 percent this year, while unemployment will hit 14 percent, a huge rise for a country that only a few years ago had a jobless rate of less than 4 percent.

Meanwhile, Cyprus' new finance minister Michalis Sarris said spending cuts and tax increases agreed with international creditors last November and included in a draft bailout agreement are sufficient to get the country's finances under control.

Sarris said he would be "surprised if more austerity was demanded. Cypriot legislators passed a raft of public sector wage cuts as well as tax increases in December as part of the draft deal. Eurozone officials say they want to see a deal finalized by the end of March.

[Associated Press]

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