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Cyprus leader pleads for EU help as bailout costs soar

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(Globalpost/GlobalPost)

Cypriot President Nicos Anastasiades appealed for more help from European Union on Friday as the spiralling costs of a eurozone bailout impose a crippling burden on the island's economy.

Anastasiades did not specify what additional assistance he was seeking, but a Cypriot diplomat in Dublin for a meeting of eurozone finance ministers called to finalise the terms of the bailout said Cyprus was not seeking more money.

Germany made plain in any case that the 10 billion euros ($13 billion) that the European Union and the International Monetary Fund will stump up as their part of the 23 billion package is not up for debate.

That leaves Cyprus having to fund the whole of a 6.0 billion euro funding shortfall that emerged this week in addition to the 7.0 billion euros it is already raising from swingeing austerity measures and a massive hit to its once lucrative banking sector.

Anastasiades called for a change of EU policy towards Cyprus to help it tackle the resulting crisis.

Anastasiades said he had already spoken to EU Economy and Euro Commissioner Olli Rehn ahead of the Dublin ministers' meeting.

He said he would also write to European Commission chief Jose Manuel Barroso and to EU President Herman Van Rompuy.

"The letter to Mr Barroso and Mr Rompuy will refer to the need for EU policy to change towards Cyprus by giving it extra assistance, given the critical times we are going through as a result of the economic crisis and the measures imposed on us," Anastasiades told reporters.

He did not elaborate on what additional support he was seeking.

A member of the Cypriot delegation in Dublin told AFP Cyprus was seeking "no extra money" and was instead seeking help from a European Commission task force to lessen the burden of measures agreed in exchange for loans.

German government spokesman Steffen Seibert said: "The contribution from international creditors will not change," adding that the 10-billion-euro package of emergency loans was "already very large".

Under the preliminary bailout terms agreed with international creditors last month, Cyprus was already drastically downsizing its banking sector, raising taxes, reducing the public sector workforce and privatising state-owned utilities to raise 7.0 billion euros.

But the government acknowledged on Thursday that the costs have now soared to 23 billion euros ($30 billion) and that Cyprus is expected to fund the whole of the 6.0 billion euro shortfall too.

With the island already facing years of austerity and a deep recession, the government is expected to resort to a series of emergency measures to close the gap.

Most of the money being raised by Cyprus was already coming from a hit on deposits above 100,000 euros at the country's two largest banks, and there are fears this burden could be increased.

Cyprus is also set to raise 400 million euros through the sale of gold reserves, 600 million euros through a corporate tax rise, and further funding from privatisation and a roll-over of debt held by Cypriot investors, including a 2.5 billion euro loan extended by Russia in 2011.

Anastasiades denied that the additional costs were the result of the uncertainty that has rocked the economy during the marathon negotiations since he took office in February.

"I do not think it is the last three months but a general delay that has led us here," he said. "It will be addressed."

The unprecedented eurozone "haircut" on deposits forced the government to close all the island's banks for nearly two weeks last month and impose draconian controls when they reopened to prevent a run on accounts.

The finance ministry eased the controls from from Friday, ending restrictions on all transactions under 300,000 euros ($393,000) and raising from 1,000 euros to 2,000 euros the amount of cash that departing travellers are allowed to take with them.

But a daily cash withdrawal limit of 300 euros in the two big banks is to remain in place for at least the next seven days.

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http://www.globalpost.com/dispatch/news/afp/130412/cyprus-leader-pleads-eu-help-bailout-costs-soar