By
Bruno Waterfield: Cyprus must sell off the gold, amounting to three quarters of the country's
reserves, to try to meet the soaring costs of its bail-out without any
additional help from the European Union and IMF.
The extra financing burden, equivalent to a third of the island's annual GDP,
is expected to push Cyprus into an economic meltdown and takes the cost of
the Cypriot bail-out to over 135pc of the country's economic wealth.
Mario Draghi, the president of the ECB, has told Cypriot government that money
from the gold sale cannot be used to reduce public debt but must be used to
help pay back €9.1bn in emergency liquidity assistance (ELA) given to the
central bank of Cyprus.
"The decision is going to be taken by the central bank. What is
important, however, is that what is being transferred to the government
budget out of the profits made out of the sales of gold should cover first
and foremost any potential loss that the central bank might have from its
ELA," he said.
Increasing the humiliation for Cyprus, Mr Draghi has written to Nicos
Anastasiades, the Cypriot President, ordering him to stop angry MPs from
criticising or investigating the central bank and threatening him with
sanctions in the EU courts.
edited by WD
"The independence of central banks in the euro area is enshrined in the
treaty," said Mr Draghi. "The ECB will look at the elements in
Cyprus from this angle and that the ultimate jurisdiction which safeguards
the treaty is the European Court of Justice."
Panicos Demetriades, the head of the central bank of Cyprus is under fire from Cypriot MPs and has been blamed by many on the island for bungling the bail-out, leading to the near collapse of the banking sector and the closure of the country's second biggest bank.
The Eurozone's finance ministers, meeting in Dublin, told Cyprus that there was no extra help for it to raise €13bn it needs to find as the condition for unlocking €10bn EU-IMF loans.
Despite an original deal for €17.5 billion last month, the EU-IMF troika now estimates the cost of rescuing Cyprus from bankruptcy is €23.5bn, with all the additional money coming from the island.
Olli Rehn, the EU economic affairs commissioner, played down comparisons between "entirely different sets of figures", claiming that the €23.5bn was for "gross financing" with "additional financial buffers to allow for unexpected fiscal developments".
Mr Rehn admitted that there was "plenty of uncertainty about the exact trajectory of growth in Cyprus" and said he was unable to predict whether the size of the economic contraction in Cyprus would be "10pc, 12.5pc or 15pc".
"I don't deny that under the present circumstances, there is quite some uncertainty about the exact figure," he said.
Eurozone finance ministers also agreed to extend the repayment of EU-IMF loans to Ireland and Portugal for a further seven years, easing the pressure on both countries to exit their bail-out programs and resume normal borrowing.
A confidential EU-IMF analysis of Portugal's debt repayments, leaked on Thursday, predicts that even with extra time there is a "substantial funding risk", signalling the need for a second bail-out next year.
Portugal was plunged into a new round of political crisis last weekend after its constitutional court blocked austerity measures contained the country's 2013 budget, measures that are the condition of continued EU-IMF funding.
Panicos Demetriades, the head of the central bank of Cyprus is under fire from Cypriot MPs and has been blamed by many on the island for bungling the bail-out, leading to the near collapse of the banking sector and the closure of the country's second biggest bank.
The Eurozone's finance ministers, meeting in Dublin, told Cyprus that there was no extra help for it to raise €13bn it needs to find as the condition for unlocking €10bn EU-IMF loans.
Despite an original deal for €17.5 billion last month, the EU-IMF troika now estimates the cost of rescuing Cyprus from bankruptcy is €23.5bn, with all the additional money coming from the island.
Olli Rehn, the EU economic affairs commissioner, played down comparisons between "entirely different sets of figures", claiming that the €23.5bn was for "gross financing" with "additional financial buffers to allow for unexpected fiscal developments".
Mr Rehn admitted that there was "plenty of uncertainty about the exact trajectory of growth in Cyprus" and said he was unable to predict whether the size of the economic contraction in Cyprus would be "10pc, 12.5pc or 15pc".
"I don't deny that under the present circumstances, there is quite some uncertainty about the exact figure," he said.
Eurozone finance ministers also agreed to extend the repayment of EU-IMF loans to Ireland and Portugal for a further seven years, easing the pressure on both countries to exit their bail-out programs and resume normal borrowing.
A confidential EU-IMF analysis of Portugal's debt repayments, leaked on Thursday, predicts that even with extra time there is a "substantial funding risk", signalling the need for a second bail-out next year.
Portugal was plunged into a new round of political crisis last weekend after its constitutional court blocked austerity measures contained the country's 2013 budget, measures that are the condition of continued EU-IMF funding.
edited by WD
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