June 11, 2012
Cyprus said that it urgently needed European financial aid to boost its banks' capital, a step that would make it the fifth euro-zone economy to seek help from the region's bailout funds.
Cyprus Finance Minister Vassos Shiarly said that the country's need for an international bailout was "exceptionally urgent" in order for it to recapitalize its banks, and that the issue would need to be resolved by the end of the month.
According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn't strain the resources of the euro zone's bailout funds. The economy of Cyprus—an island of 800,000 people—is 1/60th the size of the economy of Spain, which said over the weekend that it would seek European funds to recapitalize its own banks.
However, some European officials said the main impact of Cyprus's request on Monday might be to send a further signal that contagion is spreading in the euro zone. Greece, Ireland and Portugal are all in bailout programs.
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