Greece ‘directly’ affected by Cyprus crisis: PM

Economic problems in Cyprus “directly” affect struggling Greece and the traditional allies will coordinate policies ahead of a European eurozone summit later this week, Greek Prime Minister Antonis Samaras said on Monday.”It is our common desire to strengthen coordination as our policies are characterised by shared views,” Samaras said after meeting with newly-elected Cyprus President Nicos Anastasiades.

“Our relation with Cyprus is fraternal, nobody should forget that,” said Samaras, before adding: “Current economic developments in Cyprus directly regard Greece too.”

As part of a rescue package reached last year, Greece obtained a partial reduction in debt owed to private creditors, which included Cypriot banks.

Anastasiades’ incoming administration wants this taken into account during talks with international creditors for Cyprus’ own bailout, which has been earmarked for the end of March.

“The consequences of the haircut of Greek bonds was not handled on our side in the best possible manner within European institutions,” the new president told To Vima newspaper over the weekend, referring to Cyprus’ previous Communist administration and discounts applied to the value of privately-held Greek debt.

The anticipated 17-billion euro ($22 billion) bailout figure for Cyprus is roughly the same as the island’s annual output, and would boost its debt to more than 140 percent of gross domestic product (GDP), a level considered unmanageable in the long term.

Greek media over the weekend said that Cyprus would ask Greece to turn over part of a 50-billion-euro bailout provided by the European Union and International Monetary Fund that was designed to recapitalise Greek banks.

Cyprus media reports had said Anastasiades would ask Athens to offer the recession-hit island up to three billion euros to help bail out its banks and ease the expected EU financial aid package.

Cypriot daily Phileleftheros said on Monday that Nicosia was being “squeezed” by international lenders to accept harsher austerity measures and Cyprus believes that if Greece can help it recapitalise Cypriot banks then it can resist the pressure.

This could be done by ring-fencing Greek-exposed Cypriot ‘bad banks’ operating in Greece so they could then receive Greek rescue cash, it said.

But Greek government spokesman Simos Kedikoglou said: “There is no specific request on the part of Cyprus for a Greek participation in the recapitalisation of Cypriot banks.

“There is close cooperation between the two countries and a determination to exit the crisis together,” he added.

The Greek state news agency ANA on Sunday cited a Cyprus official who noted that at this stage Nicosia sought “political” support from Athens as Cyprus negotiates its own rescue plan.

Phileleftheros said the troika of international lenders – European Commission, European Central Bank and the International Monetary Fund — are only willing to loan Cyprus 10 billion euros from the estimated 17.5 billion it needs over fears that it would be unable to pay back a higher amount.

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