European Union finance ministers are meeting in Dublin Friday and Saturday to discuss aid for struggling members, with Cyprus high on the agenda.
The meeting comes just a day after news that the cost of the Cyprus bailout has jumped sharply, less than a month after international financial experts thought they had figured out the extent of the Mediterranean island’s financial woes.
Cyprus initially thought it would have to contribute about $9 billion to secure a $13 billion rescue package from its international lenders. But a deeper analysis disclosed Thursday shows that the economic fortunes of the offshore tax haven are worse than first thought.
That will force Nicosia to boost its share by nearly another $8 billion, to $17 billion.
The bailout deal Cyprus patched together with international lenders last month called for it to shut down the island’s second largest bank, Laiki, and confiscate 60 percent of the deposits of the biggest account holders, many of them wealthy Russians.
Now, to raise the additional money, the island will be forced to sell about three-fourths of its gold reserves for about $524 million, levy additional taxes, sell state assets and renegotiate terms of a loan with Russia.
Cyprus is the fifth of the 17 nations in the eurozone to need a bailout. But it is the first time that other European countries, the European Central Bank and the International Monetary Fund forced large bank depositors to pay part of the cost.
European officials say the Cyprus plan was unique and will not be repeated. But the wealthier, northern countries in the eurozone have become weary about the string of bailouts they have had to finance for the bloc’s debt-ridden countries.
During the meeting in Dublin the finance ministers are also expected to discuss creating a central European supervisory entity to monitor European banks.
(Photo: Melissa Wall/flickr.com)