NICOSIA, Cyprus (AP) — Cyprus' new president ruled out on Thursday any writedown of the country's debt or bank deposits as part of a financial rescue package it's trying to finalize with international lenders.
Nicos Anastasiades told parliament that he wants to conclude a bailout agreement as soon as possible, but that doesn't mean accepting a writedown. "We're not seeking special treatment, but fair treatment. We seek what we deserve, the solidarity of our partners," Anastasiades said during a ceremony where he formally assumed presidential duties. "But let me be clear...No references to debt or deposit haircuts will be accepted. Such a matter isn't even up for discussion."
Cyprus has asked the 16 other European Union countries that use the euro and the International Monetary Fund for a bailout of as much as €17 billion ($22.32 billion) to save its banks, which lost billions to bad Greek debt, and to prevent bankruptcy. The size of the loan, equivalent to the country's annual economic output, has raised concerns it could prove too large to pay off.
Cypriot and European officials have rejected ideas of a debt or deposit writedown, warning that any such move would only add to Cyprus' problems. Most of Cyprus' debt is held by Cypriot banks and a haircut would increase the banks' needs for new cash and, as a result, the size of a rescue loan. A writedown of deposits could trigger a run on Cypriot banks, also adding to the lenders' recapitalization burden.