* Leaked minutes show finmin concerned over Dec. public
* Also worried that EU peers could financially "butcher"
* Island sought aid in June
By Michele Kambas
NICOSIA, Oct 30 Cyprus may struggle to pay
public sector salaries in December unless a bailout deal is
clinched by mid-November, an official document quoted Finance
Minister Vassos Shiarly as saying.
The confidential minutes of an Oct. 3 meeting in parliament
quoted Shiarly as saying Cyprus might be "butchered" if
international lenders dealt with the small country in isolation
from other euro zone states that need financial aid.
The minutes, reported in the Politis daily on Tuesday and
seen by Reuters, illustrated growing unease at delays in meeting
financial aid needs which the troika of international lenders
has put at up to 16 billion euros ($20.65 billion).
Cyprus, shut out of international capital markets for more
than a year, was forced to turn to its EU peers for help after
its two largest banks took overwhelming losses on a writedown of
Greek sovereign debt earlier in 2012.
Meeting December's payroll commitments was contingent on the
goodwill of bankers, the minutes quoted Shiarly as saying.
Shiarly said that if a deal were agreed, Cyprus could get a
first instalment of aid by Dec. 24. Asked if Cyprus would manage
until December, he said: "If needs be. We will have
difficulties, but nothing can be absolute.
"I can't make predictions from now, because no banker would
undertake a commitment on financing, even when times were good.
I'm just saying it's manageable."
He also cited disagreements between Cyprus and lenders on
the recapitalisation requirements of its banks. Lenders believe
Cyprus needs 10 billion euros for banks alone, while Cypriot
authorities put the total closer to 5 billion euros, Shiarly
Cyprus sought financial aid from the European Union and the
International Monetary Fund in June, but the cash-starved island
has still not concluded a bailout deal with lenders.
The minutes show Cypriot authorities clearly under-estimated
the complexities of the process.
A deal should have been in place by Oct. 20 to put the issue
on the agenda of the Nov. 12 meeting of euro zone finance
ministers in Brussels, Shiarly told the lawmakers.
But Cyprus in fact only signalled it was ready to delve deep
into a final round of talks last week, after preparing what it
said were its own "counter-proposals" to an austerity package
prepared by lenders in July.
It has since been waiting for the arrival of a team from the
troika, comprising the European Commission, IMF and European
A government source told Reuters they believed a deal was
"I'm optimistic any differences can easily and swiftly be
resolved," Shiarly told reporters in a brief comment on Tuesday.
He was not asked about the Oct. 3 briefing but said the troika
would possible come to Cyprus early next week.
"TORN TO PIECES"
At the parliamentary hearing, one lawmaker said Cyprus's aid
needs should be discussed at the same time as those of Spain and
Greece because, if isolated, "Germany and Finland will tear us
Responding to this at the time, Shiarly said:
"Yes. That is precisely their approach. Our case is indeed
difficult, because some have very negative positions concerning
Cyprus ... I'm inclined to believe that if we go on our own,
naturally they will butcher us."
Cyprus accounts for about 0.2 percent of the euro zone's
economy but its bailout could be proportionately huge.
If troika assessments are verified, the island would need 16
billion euros - 10 billion for its banks and 6 billion for its
fiscal requirements. Cypriot assessments put the total at 11
The island's debt to GDP ratio is already hovering at about
The island of one million people frequently falls under the
radar, a fact authorities were clearly hoping it could turn to
its advantage with a less-than-strenuous grilling from EU peers.
In the minutes of the discussion, Shiarly relates cases of
some European finance ministers getting testy with Cyprus even
though it was 2.30 a.m. and they were "exhausted" after spending
hours on Greece and Spain.
"Imagine what will happen if we go completely on our own,"
he was quoted as saying.