June 26 - Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout that is more than half as big as its economy, officials say. Ciara Sutton reports.
'Loans did not come so the troika is' - read one headline after Cyprus became the fifth euro zone economy to seek emergency funding from Europe. The region's third smallest economy asked for help after reportedly exhausting attempts to secure loans from either China or Russia. Last year it secured a two and half billion euro loan from Russia which provides valuable customers to Cyprus' low tax off-shore financial sector. (SOUNDBITE) (Greek) ANDREAS YANNAKOU, CYPRIOT MAN, SAYING: "It's the workers who will probably pay for this because they will have to limit spending, and most of all the civil servants." The island's banking sector is heavily exposed to debt-crippled Greece. Euro zone officials say it needs a bailout of up to 10 billion euros - over half the size of its economy. While the sum required could easily be covered by Europe's Financial Stability Fund many are asking how the bailout will be managed, says Peter Chatwell from Credit Agricole CIB. (SOUNDBITE) (English) INTEREST RATES STRATEGIST AT CREDIT AGRICOLE CIB, PETER CHATWELL, SAYING "It's more symbolic really just as the more liquid peripheral markets reacted to how the Greek PSI was dealt with. I think they will also react with how Cyprus' problems are dealt with. It's a case of looking at the finer details here. What sorts of rates are they offered in a bailout? Is there subordination? These kinds of issues. The situation in Cyprus is the latest sign that policymakers have failed to stop the debt crisis spreading. European leaders are meeting at a crucial summit on Thursday. But few expect them to find a concrete solution to the region's problems, despite appeals from the European Commission's President. (SOUNDBITE) (English) EUROPEAN COMMISSION PRESIDENT, JOSE MANUEL BARROSO, SAYING: "This crisis is the biggest threat to all that we have achieved through European construction over the last 60 years. Faced with this stark reality, standing still is not an option. A big leap forward is now needed." Cyprus' troubles have been mounting for some time - it's been shut out of international capital markets for over a year. And yields on its 10 year benchmark bond shot over 16 percent after the bailout announcement. While this bailout would be relatively small the prospect of further requests can't be ruled out. Ciara Sutton, Reuters