* Cyprus says deteriorating economy drove bailout needs up
* Central bank governor comes under growing pressure
* C.bank board hit by resignations, adding to pressure on
By Karolina Tagaris and Michele Kambas
NICOSIA, April 12 Cyprus said on Friday that an
increase in the cost of its total bailout package to about 23
billion euros would not lead to more money being taken from
depositors in the country's banks.
Cyprus has been thrown into economic turmoil. The terms of
its bailout have forced massive losses on depositors at two of
its biggest banks - one of which will be wound down altogether.
The government is also piling pressure on the central bank
governor to quit.
The euro zone member says its financing needs under its
EU/IMF bailout have risen to around 23 billion euros from an
original 17.5 billion euros, because its deteriorating economy
will depress its revenues.
The island looks set to receive 9 billion euros from the
euro zone's bailout fund and 1 billion euros from the IMF, and
it will raise the remaining 13 billion euros itself.
Projections from last November, however, 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 recapitalisations 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 the country's financial need had increased since
"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 Feb. 28.
Cyprus and the European Union have agreed in principle on
how it will provide its 13 billion euro contribution to the
Cyprus is winding down its second-largest lender, Popular
Bank, and transferring some of its assets to Bank of
Cyprus, whose own depositors will suffer heavy losses
from a restructuring and recapitalisation of the sector.
The country's contribution also includes selling 0.4 billion
euros worth of gold - most of its reserves, and 1.4 billion
euros in privatisations.
An investigation into the demise of the two biggest banks
has increased the friction between the government and Central
Bank Governor Panicos Demetriades, appointed by Cyprus's former
communist administration in May 2012.
On Wednesday, parliament said it would launch an inquiry
into whether Demetriades withheld information from legislators
in an investigation into the island's now-collapsed banking
That decision drew a scathing response from ECB President
Mario Draghi, who in a letter to the Cypriot president said it
was effectively a procedure to sack the governor, just days
after the government withdrew the appointment of his deputy and
right-hand man, Spyros Stavrinakis.
In the latest sign of tension between the two bodies, two
central bank board members, Andreas Matsis and Harris
Achiniotis, have stepped down, a spokeswoman for the bank said
on Friday, without giving reasons for their resignation.
A source close to the matter said a third member had also
handed in his resignation, reducing the six-person board to two,
Executive power on the central bank board rests with the
governor, so the resignations are not expected to affect
decision-making at the bank, although they add to the pressure
on Demetriades himself to quit.