Eurogroup, ECB rule out debt haircut for Cyprus

The Eurogroup of eurozone finance ministers and the European Central Bank ruled out Friday a partial debt write-off for Cyprus. Eurogroup chief Jean-Claude Juncker, speaking on German public radio Deutschlandfunk, said that a so-called debt "haircut" for Nicosia was "not one of the instruments we see as a priority at the moment." "We've agreed to exceptionally undertake a partial debt write-off in the case of Greece only," said Juncker, who is Luxembourg's prime minister.
"To that extent I would rule it out from my point of view."
Juncker said the Eurogroup hoped to wrap up its deliberations on aid to Cyprus by January 21. ECB executive board member Joerg Asmussen also ruled out a debt write-off for Cyprus in an interview on German public television. "It's not an issue at the moment," he told the ARD channel. "We don't know yet what the country's financing needs will be. We'll have the final figures in mid-January," Asmussen said.
Nevertheless, it was likely that the level of Cyprus's debt would not be sustainable. "We'll have to examine all possible measures to make it sustainable," Asmussen said. On Thursday, the International Monetary Fund said talks on a bailout for Cyprus were not expected to wrap up this year.
Nicosia requested a bailout in June when its two largest Greek-exposed banks asked for assistance after failing to meet EU capital buffer criteria. The money needed by Cyprus has been widely reported to total 17.5 billion euros ($23.1 billion) - 10 billion euros for the banks, 6.0 billion euros for maturing state debt and 1.5 billion euros for public finances. On Monday, a finance ministry official warned that Cyprus could default on loan payments due this month unless it can reach an agreement on a bailout within days.
The country's entire GDP in 2011 was 17.97 billion euros and, according to 2013 budget projections, it is expected to shrink 2.4 percent this year. Standard and Poor's slashed Cyprus' credit rating Thursday by two notches to CCC+, a level indicating a country is vulnerable to default.