Cyprus has become the fifth eurozone country to ask for a bailout from its partners in the European currency union as it said it needs help to shore up its banks, which are heavily exposed to the Greek economy.
In a statement by the Cypriot government on Monday it said that it required financial assistance following “negative spillover effects through its financial sector, due to its large exposure in the Greek economy”.
Stefanos Stefanou, government spokesman, did not specify how much Cyprus would ask from the European bailout fund, saying that the amount would be negotiated in the coming days.
Meanwhile, the 27 leaders of the European Union are set to meet in Brussels for a two day summit starting on Thursday.
Stefanou said that despite its demand for European aid, the Cypriot government would continue negotiations for a possible loan from a country outside the EU, such as Russia or China.
The country needs to find about 1.8bn by a June 30 deadline to recapitalise its second largest lender, Cyprus Popular Bank.
Earlier on Monday, ratings agency Fitch became the third agency to downgrade Cyprus’ credit rating to junk status, estimating that the island will need another €4 billion ($5bn) to recapitalise its banking sector,according to AP.
Meanwhile there is also increasing uncertainty about the new Greek government, with the incoming finance minister resigning over health reasons and Antonis Samaras, the prime minister, recovering from eye surgery -with a review of its bailout programme delayed.