Cyprus says increase in bailout costs won't affect banks or depositors

NICOSIA (Reuters) - Cyprus said on Friday that an increase in the cost of its total bailout package to about 23 billion euros would not lead to additional demands on bank depositors.

The euro zone member has said its financing needs under its EU/IMF bailout have risen to around 23 billion euros, from 17.5 billion euros originally, because its deteriorating economy will depress its revenues.

It is to receive 9 billion euros from the euro zone's bailout fund and 1 billion euros from the IMF and will raise the remaining 13 billion euros itself. Projections from last November when the previous communist-led administration concluded a draft memorandum of understanding on a bailout had estimated the island would only need 17.5 billion euros in total.

"This (increase) in no way means new recapitalizations of the banks are planned, nor an additional burden on depositors," government spokesman Christos Stylianides said.

He said a "rapidly deteriorating" banking sector and public finances meant financial requirements had increased since November.

"It was an irresponsible, cowardly and indecisive failure to sign the memorandum at that time," said Stylianides, a spokesman for the centre-right government which took office on February 28.

Cyprus is winding down its second-largest bank Popular and transferring some of its assets to Bank of Cyprus, whose own depositors will suffer heavy losses from a restructuring and recapitalization of the sector.

Cyprus and the European Union have agreed in principle how it will provide its 13 billion euro contribution to the bailout package. Cyprus's contribution also includes selling 0.4 billion euros worth of gold, which is most of its reserves, and 1.4 billion in privatizations.

(Reporting By Michele Kambas; Editing by Susan Fenton)

Source: http://news.yahoo.com/cyprus-says-higher-financing-needs-wont-affect-banks-135026059.html

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