Cyprus to ask for bailout from eurozone partners

Source: BBC

Cyprus has told the European authorities that it intends to apply for financial assistance, the fifth eurozone member to do so. It said it needs help to shore up its banks, which are heavily exposed to the Greek economy.

Earlier Spain formally requested a bailout loan, expected to be for up to 100bn euros (£80.2bn, $125bn), for its banking sector.

Cyprus' banks have lost large amounts on Greek government bonds. They are also facing big losses on loans made to businesses in Cyprus, which have been hard hit by the deep recession in neighbouring Greece, its biggest trading partner. Earlier, Cyprus's credit rating was cut to junk status by the ratings agency Fitch, making it very hard for it to raise funds itself.

There was no further detail from the Cyprus government, but Fitch said the country, which has a population of one million, would need 4bn euros (£3.2bn) to support its banks, the equivalent of almost a quarter of its GDP, or economic output, last year

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