Last Updated : 12 April 2013 at 08:40 IST
In a new twist to the Eurozone crisis, Cyprus creditors have suddenly found that the island nation would require at least 23 billion Euros to be rescued contrary to the earlier figure of 17.5 billion Euros.
As of now, it seems nobody knows for sure how this has suddenly come about. A spokesperson of Cyprus government blamed the previous government.
The BBC reports: He blamed the gulf between the original bailout total and the new 23bn figure on the previous administration and the time it took to negotiate a bailout, delays which pushed the cost of recapitalising its banks much higher.
“…reality set in as a botched deal began to unravel. The recession will be far deeper, requiring greater government spending on benefits. And troubled banks might need further recapitalisation.”Mark Lowen of BBC News said in yet another analysis.
The economy of Cyprus is expected to shrink at least by 10% this year.
Meanwhile, the Eurozone finance ministers are scheduled to meet on Friday to discuss the current development.
Last month, a deal had been clinched to rescue Cyprus, wherein the country was supposed to raise 7.5 billion Euros for the promised help from the troika of IMF, ECB and the European Commission which was to the tune of 10 billion Euros. Now, it looks like Cyprus will have to raise additional 5.5 billion Euros to 6 billion Euros taking the total figure it is supposed to raise in the range of 13 billion Euros.
In trying to raise the previous amount of money, not only was a bank packed up, depositors who held more than 100000 Euros had to take a hair cut of about 60%.
The Central Bank of Cyprus had clarified that reports of Cyprus' $523 million gold sale have not been “raised, discussed or debated” and there exists no “current or future plans to do so on the board’s agenda.” This was reported by Cyprus News Agency to whom the spokesperson for the Central Bank of Cyprus decided to talk.
[The news agency Reuters had reported Wednesday that “...European Commission documents showed Cyprus plans to sell 400 million euros' worth of reserves to finance part of its bailout - a move that marks the biggest euro zone bullion sale in four years.”]
In a twist, late on Thursday, Christos Stylianides, spokesperson of Cyprus government said that the option was on the table:
“The Cypriot government put various options forward, including this," Christos Stylianides told a news conference.
Last Updated : 12 April 2013 at 08:40 IST
The country holds bullion reserves of 13.9 tons as of February and an assessment by the European Commission says the island nation must have to sell close to 400m euros worth of gold. That amounts to 10.36 tons of gold (a figure almost equal to what Turkey bought in January.)
When the Reuters report on Cyprus’ gold sales emerged on Wednesday, it caused a fall in gold prices of at least 1%. But the miniscule sales by Cyprus will not dent the price of gold over the medium term as the appetite for gold in international markets far exceeds the supply.
Meanwhile, the uncertainty and potent risks that the twist in Cyprus has brought forth may ensure that safe haven demand in gold would persist. On the Comex, gold for delivery on June 13 closed at 1564.90, Thursday and as of Friday morning on the Globex platform, the markets ruled at $1561.45 an ounce.
Does it herald a bull run?
The answer depends on the actions of the island nation of population less than 1 million and the demanding troika!
