Bailing out Cyprus swells to US$30b

The cost of bailing out Cyprus has swollen to 23 billion euros (US$30 billion), with the crisis-hit country having to take on the lion's share of the measures needed to avoid bankruptcy, according to a draft document by the country's international creditors.

The draft document, obtained yesterday, says the country will have to find 13 billion euros - an increase on the 7-billion-euro contribution agreed during the country's chaotic bailout talks last month. The money will be raised by imposing heavy losses on large bank deposits, levying additional taxes, privatization and a part-sale of the central bank's gold reserves.

The so-called troika of international creditors - the European Commission, the European Central Bank and the International Monetary Fund - are set to grant the Mediterranean island nation a 10-billion-euro rescue loan package to recapitalize Cyprus's shaky banking system and keep the government afloat.

As part of the original bailout agreement, Cyprus agreed to overhaul its bloated banking industry by breaking up its second-largest bank, Laiki, and imposing losses on savers who have more than 100,000 euros in another lender, the Bank of Cyprus.

In the latest draft document, the troika has revised the cost of bailing out Cyprus amid a gloomier economic outlook, adding an additional 6 billion euros to the bill.

"The sheer size of the increase has underlined the extent of the enormous challenges facing Cyprus itself," Jonathan Loynes of Capital Economics said in an analyst note.

The document also shows that the troika expects the break-up of Laiki to raise 10.6 billion euros. Those funds will be used to prop up the Bank of Cyprus.

Cyprus will also have to sell off parts of its gold reserves - a measure that is expected to raise another 400 million euros - a first for a bailed-out European country.

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