The nation of Cyprus ultimately became the fifth Eurozone country to ask for financial assistance to help restore its struggling economy following a day of heavy selling on financial markets quickly ended with apprehension that this week’s European summit will lead to the absence of a blueprint that should supposedly rescue the Eurozone currency. It is known that Cyprus, being one of the nominal members of the Eurozone‘s single currency union is expected to need a bailout package of several billion Euros to help the stressed country pay its debts and rescue its banks. Following countries such as Ireland, Greece, Spain and Portugal in asking for formal aid from bailout funds set by Brussels in response to the overwhelming debt crisis.
Nicosia disclosed that the country had been caught in the ripple effect of the crisis in the neighbouring Greece while it formally asked for formal assistance for a bailout fund from Brussels. The news was followed by a declaration in Athens that Vassilis Rapanos, the newly appointed finance minister in the new alliance government had recently resigned without formally taking up his office at the same time Prime Minister Antonis Samaras was ill-fit to attend the Brussels summit following an eye operation.
Markets were also bewildered by comments by Angela Merkel who quenched optimism that this week’s meeting would lead to agreed terms of drastic proposals for a full Eurozone banking coalition (common Eurobonds and the use of Europe’s bailout funds to refund banks directly). However the German chancellor said that this radical move in sharing the debt liability within the Eurozone is financially and economically absurd. Although he believed that a Euro collapse could lead to a 10 per cent contraction in Europe’s largest economy. Berlin insisted that Eurozone members must give up its full control over their budgets and autonomy of their banks in return for an agreement.
Spain at last made its formal request for bailout funds from the European Union earlier on Monday, with a letter failing to mention the amount it needed to begin with that ultimately left markets baffled on how much the county’s troubled banks will need to be uplifted. The rather meticulous process of gathering the bailout of €100 billion should see a memorandum signed at a meeting of Eurozone finance spokespersons on the 9th of July.
With further trepidation and test on individual banks not due until September, some of the money might not be requested until after that. Leaders from the Spanish government and the Bank of Spain have repetitively mentioned that the bailout funds they are requesting are not needed urgently. They also added that the €62 billion figure provided last week by two independent auditors of Spain’s banking district would cover against a severe inflation in the next three years signifying their request may not go much higher than the said amount. EU commissioner Olli Rehn has high hopes that the deal pertaining to the loan terms should be completed within weeks.