Cyprus's central bank chief has ruled out writing down the
country's sovereign debt as part of an international bailout now
being negotiated, saying such a move could undermine Europe's
currency union, the Associated Press reports Tuesday.
In an interview, Panicos Demetriades told the newsagency that
talk of a Cypriot debt writedown--or haircut--similar to that made
by neighboring Greece shouldn't even be taking place.
In Greece's case, private sector investors were forced to take
losses on their holdings of Greek government bonds, a step that the
other 16 euro zone countries insisted would remain a one-off for
fear of scaring away investors.
"Haircuts of any kind will not help," Demetriades said.
"Discussions undermine the prospect of recovery and threaten the
stability of the euro area, not just Cyprus."
In his remarks, Demetriades said Cypriot banks, which are at the
center of Cyprus's debt crisis, will need less than 10 billion
euros ($13.3 billion) to be bailed out, less than forecast in a
draft version of the loan deal the country is discussing with
international creditors from the European Union and the
International Monetary Fund.
Debt inspectors are now working on a report to determine the
exact amount that Cypriot banks will need to replenish their
capital buffers. The sum will help determine how much in rescue
loans the Cypriot government will get, the AP reports.
If the banks require the full EUR10 billion--a figure equal to
more than half the country's EUR17.5 billion gross domestic
product--the country's debt burden would be deemed
unsustainable.
Write to Alkman Granitsas at alkman.granitsas@dowjones.com
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