Cost of Cyprus bail-out surges, gold sale not certain — official
THE Cypriot government confirmed a report yesterday that the cost of its international bailout had surged to ¤23bn from ¤17.5bn, putting the already teetering economy of the island in danger of collapse.
Government spokesman Christos Stylianides said in the capital Nicosia yesterday — ahead of a meeting in Ireland today — that the ¤17.5bn bail-out amount in the European Union-International Monetary Fund (EUIMF) memorandum in November had risen to ¤23bn. The statement means Cyprus will now have to find ¤5.5bn more than the ¤7bn the Nicosia government needed to raise in order to secure the EU-IMF bail-out of ¤10bn.
“Who is responsible for this? How did we get here? It was the fear of responsibility and indecision of the previous government,” Mr Stylianides said.
He also said a sale of gold reserves was among several options for Cyprus’s own contribution towards an international bail-out, but said the ultimate responsibility for that rested with the central bank.
“The Cypriot government put various options forward, including this,” he said. “In its consultations … so we could have the possibility of meeting financing requirement,” he said, adding that it was “one of many”.
Earlier a central bank spokeswoman said the sale of gold reserves had to be approved by the board of the central bank, and it was not on the board’s agenda.
Cyprus may have to sell gold reserves to raise about ¤400m to finance its part of the bail-out, an assessment of Cypriot financing needs prepared by the European Commission showed on Wednesday. The document said there had been a commitment from Cypriot authorities to this effect.
Gold fell yesterday to its lowest in a week at $1,553.10/oz and was at $1,557.51 before the close of trade. On Wednesday gold had posted its biggest one-day fall since February 20, accelerating losses after news of the Cyprus gold sale plan.
The document said Cypriot authorities were “committed” to sell excess amounts of gold reserves. Cyprus’s central bank February accounts showed the island had gold reserves worth ¤563.4m.
Analysts said heavily indebted eurozone nations such as Italy and Portugal could also come under pressure to sell their bullion reserves as a result of the possible Cyprus gold sale. “Cyprus may be a one-off, (but) the market’s concern will be that it isn’t, and that other countries will be invited to sell their gold,” a gold trader said. “It’s a potential gamechanger for the market.” he said.
“Given we know that Portugal rejected the most recent austerity plan, and they have over 90% of the country’s foreign exchange reserves in gold, does this mean that Portugal perhaps will be asked to sell some of its gold?” Between them, Portugal, Ireland, Italy, Greece and Spain hold more than 3,230 tons of gold, worth nearly ¤125bn at current prices, data show. Reuters