Cyprus may become the fifth Eurozone government to be bailed out because its banks are too heavily exposed to the devastated Greek economy, its finance minister warned yesterday.
The government of the €18 billion (£14.5 billion) economy has been unable to borrow on financial markets for the past year, as private investors do not believe it can support its battered banks.
The Cypriot government would need the equivalent of 10% of its GDP just to prop up Popular, its second largest bank, which needs an investor or the government to come to its aid with €1.8 billion to enable it to meet its regulatory requirements.
Spain’s bank bailout comprehensively failed to gain market support yesterday, as investors realised that the deal had done little to solve the underlying problems facing the Eurozone’s inefficient economies.
Prime Minister Mariano Rajoy claimed on Sunday the €100 billion (£80.6bn) plan to recapitalise his country’s devastated banks had “resolved” much of the cause of the crisis.
The depth of the crisis was underlined further when Fitch downgraded leading Spanish banks Santander and BBVA last night, cutting their credit ratings from A to BBB+ following the state’s downgrade to BBB last week.
And the international impact of the country’s weakness was brought home as the British arm of Santander was cut from A+ to A.
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