Cypriot President Nicos Anastasiades has asked Eurozone leaders to revisit the bailout package for the troubled island nation, after the impacts of the bailout to the Cypriot economy have been far more damaging than expected.
In a letter sent to European leaders the Cypriot President says that the bailout package, which included the restricting of two of the country’s largest banks was ‘implemented without careful preparation’ and that it has damaged the island nation’s economy far more than expected.
“The economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Anastasiades wrote, according to a passage quoted by the Financial Times. “I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”
The bailout package saw the second largest Cypriot bank, Laiki, being closed and merged with the Bank of Cyprus, the largest financial institution as well as €13 billion in cash. The Cypriot government has also had to impose harsh austerity measures to save money, an action that is set to cripple the Cypriot economy for decades to come.
Anastasiades letter comes just weeks after the International Monetary Fund criticised the EU’s bailout strategy, especially that of Greece which has seen €110 billion being given to the ravaged nation. Greece was the first European nation to be declassified from a modern economy to a developing one after its economy has went into freefall thanks to austerity and the bumbling in Brussels.
The IMF, however, has also noted the risks associated with the Cyprus bailout. In May, the institution noted in a staff report that the impact of the bank restructuring and consolidation plans were “highly uncertain” and that risks were “substantial and tilted to the downside.”
Despite these criticisms the Cypriot president’s letter has left EU officials ‘puzzled’. Anastasiades requests that the restructuring of the two biggest banks be partially undone.
“Essentially, he is asking for a complete reversal of the program,” an unnamed EU official said, and that is something that the EU is definitely not going to allow.
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