Cyprus, ‘Haircut’ On Sovereign Debt Is Out Of The Question

Posted by: : Paul EbelingPosted on: April 6, 2014 Cyprus, 'Haircut' On Sovereign Debt Is Out Of The Question

Cyprus, ‘Haircut’ On Sovereign Debt Is Out Of The Question

Cyprus has ruled out any possibility of a ‘Haircut’ of its sovereign debt, saying its debt is sustainable.

“Let me clarify that there is no such plan, no intention and no need,” Finance Minister Haris Georgiades said in a speech to an international conference on the Euro crisis in Nicosia, made available Saturday.

Cyprus’ public debt rose to 112% of its GDP at the end of Y 2013 and is expected to reach 121.5% at the end of Y 2014 and 125.8% in Y 2015 as a result of receiving EUR 10-B (US$13.7-B) in bailout loans from the European Support Mechanism and the International Monetary Fund (IMF).

“I am absolutely confident that the Cypriot debt is sustainable. And what is more important, the markets also think likewise,” Mr. Georgiades said.

The finance minister stressed that the government will do whatever is necessary to ensure it remains at the very core of the European Union despite receiving a harsh treatment when it applied for bailout assistance.

As part of its bailout program, Cyprus had to wind down the 2nd  largest bank and seize 47.5% of uninsured deposits to recapitalize its main lender, which is still reeling under the pressure of lack of capital and rising non-performing loans.

Mr. Georgiades declared that Cyprus will strictly stick to the application of its economic adjustment program, saying it is the only way for the Eastern Mediterranean island to return to the markets.

“What will help us return to the markets is our own consistency in the effort we have embarked upon, like it helped Greece,” said Mr. Georgiades in reference to Greece’s reported moves for the sale of a EUR2-B 5 yr bond.

The Cypriot finance minister noted that the government will not impose any additional taxation to finance its operations.

Cypriots had to shoulder new taxes which had taken an estimated 10 to 12% off their income, on top of salary and pension cuts of the same size since even before receiving bailout a year ago.

“Should there be need for further action in the fiscal sector this will be done by cutting spending to spare households and businesses any additional tax burdens,” said Mr. Georgiades.

He said reforms under way will make sure that the country will not face in the future the “imbalances and the extravagances” of the past.

Stay tuned…

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Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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