* Cyprus pro-reform president takes over
* Says seeks support, not favours from EU
* Rules out debt, deposit haircut for sustainability
By Michele Kambas
NICOSIA, Feb 28 Cyprus's new President Nicos
Anastasiades vowed on Thursday to work for a swift conclusion of
a bailout for the cash-starved island, ruling out debt or
deposit "haircuts" for the Mediterranean nation threatened with
a financial meltdown.
Economic turmoil engulfing Cyprus, one of the euro zone's
smallest economies, could test the European Union's mettle in a
crisis threatening to spill beyond the tiny island's shores and
unravel nascent recovery in the bloc.
Cyprus has been waiting for an economic bailout from the EU
and the International Monetary Fund for the past eight months,
hobbled by its banks' exposure to debt-crippled Greece and
The disbursement of aid has been held up by concerns the
island could barely afford a bailout bill which might equal its
domestic output, and worries in some countries, particularly
Germany, that Cyprus lags in financial transparency.
"We are seeking the solidarity of our (EU) partners, and
within that framework we will negotiate for the conclusion of a
loan agreement the soonest possible," Anastasiades said in his
investiture speech to Cyprus's parliament.
Aid to Cyprus is expected to take centre stage when eurozone
finance ministers meet in Brussels on March 4. A deal is
anticipated at the end of March, a senior euro zone official
In one of his first appointments, Cyprus will be represented
by new finance minister Michael Sarris, an economist with good
contacts in Europe, as well as in the U.S., where he was a
senior manager for the World Bank for three decades.
Conservative Anastasiades, 66, swept to victory in a
presidential runoff on Feb. 24, armed with a strong mandate to
conclude desperately needed aid from the EU and the IMF.
Cyprus sought aid last June, after an EU-sanctioned decision
to write down Greek sovereign debt blew a 4.5 billion euro - or
25 percent of GDP - hole in balance sheets of the island's two
largest lenders which then turned to the state for support.
The island has itself been shut out of international
financial markets for almost two years because of the implied
high interest on its traded debt - even though that has tumbled
in recent weeks to an 18 month low of 9.20 percent on a 10 year
benchmark bond on Thursday.
Amid the worst recession in 40 years, the bank aid figure
has since snowballed, and the island could need up to 17 billion
euros in aid for both its banks and for fiscal needs, almost
equalling the size of its economy.
"We are not seeking special treatment, but we are asking we
be treated fairly," Anastasiades told lawmakers.
Cyprus has an executive system of government. Investiture
takes place in parliament, in the same chamber where Britain
formally handed over sovereignty to the former British colony in
1960. Anastasiades's term is for five years.
Talks with lenders have been overshadowed by concerns the
bailout could be too big to ever pay off, giving rise to
speculation of how to make it manageable, including debt or even
deposit haircuts, or paying back less to investors.
"I want to be absolutely clear. Absolutely no reference to a
haircut on public debt or deposits will be tolerated. Such an
issue isn't even up for discussion," Anastasiades said.
But doubts persist. ECB lawmaker Benoit Coeure told Reuters
on Wednesday that depositors in Cypriot banks should not be
forced to take losses across the board as part of a euro zone
rescue, but did not rule out making the biggest depositors share
some of the burden..
Investor service Moody's said on Thursday that while the
election of Anastasiades boosted chances of a financial deal, it
did not alter its own probability of the island defaulting.
The recapitalisation needs of the island's domestic banks
remained uncertain, and Cyprus's debt burden could rise
dramatically to unsustainable levels, Moody's said.
"There is a 50 percent chance that the sheer size of
Cyprus's anticipated debt load will eventually compel
authorities to pursue every avenue for debt reduction, including
private-sector losses on Cypriot debt," Moody's said in a