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Cypriot EU Presidency to coincide with financial woes

Date: 03/05/12

Cypriot president Demetris Christofias looks like he is due to have his hands full over the next six months.

When Cyprus takes up the reigns of the rotating EU presidency on July 1st it’s becoming increasingly apparent that the government will have a full blown banking crisis to deal with.

As the sea of bad loans and toxic assets both foreign and domestic appear on the balance sheets of local banks the options open to local law makers have all but dried up. Popular Bank who reported losses of 2.5 billion during the last financial year looks unlikely to be able to show to the European Banking Authority that it has raised enough capital by the June 30th deadline. Banks who do not reach the European standard could be forced to ask for a bailout from the government. The Cypriot government has however been locked out of international bond markets diminishing its ability to shore up its own banking sector. While banking executives fly to various destinations including Russia to seek investment, it is likely that funds from the European Stability Mechanism (ESM) will be needed to keep the Cypriot banking system in one piece.

The wider Cypriot economy is also in a paralyzed state. With unemployment at now over 10% and a failure of the current Communist lead administration to tackle the bloated public sector it looks like President Christofias could be too busy dealing with problems at home to give anytime to Europe during his stewardship of the presidency. 

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