Lex column: Cyprus-the next Greece?

On Thursday, not people in the Eastern Mediterranean island of Cyprus, give up giving up. Cabinet of the Government of Cyprus, President jimitelisi · "he lisituofeiyasi (Rimantas Christofias) request, passivity resigned. That will, of course, don't miss this session of the Cabinet. Evaluation from a political perspective, Cyprus is a national of a Word. it should be President Christofias resignation, old-fashioned Communist is clearly absolutely no ability to solve the growing problem of Cyprus.

But problems continue to increase. Moody's (Moody) 's rating for Cyprus this week only "junk" high levels. The challenges faced by island size, increased political instability, which means that its credit rating could fall further, and also worried about more peripheral countries in the euro area. Even before the explosions destroyed the country's main power plant on 11 July, Cyprus in the approximation to the rock. Cyprus Bank holds a 31 billion euro of Greece's sovereign debt and bank debt, equivalent to Cyprus ' GROSS DOMESTIC PRODUCT (GDP) of 1.7 times. Cyprus bank capital adequacy, capital adequacy of 12% overall level. But they are likely to participate in Greece bond swap, which consumed most of the capital, banks will need to add the new capital of Cyprus. If so, perhaps Europe's financial stability arrangements (EFSF) to intervene, to rescheduled the banking sector in Cyprus.

Power plant explosion may be a turning point. Maintenance of power plants is estimated at EUR 2 billion, which will offset the cost of growth expected this year, can also raise the level of debt in Cyprus. The country's current level of debt has been a lot of, corresponding to 62% percent of GDP. Investors have begun to flee, 9-year bond yield is more than 10% of Cyprus, just shy of Ireland and Portugal are similar to the level of public debt. Asanaxiaosi ? oufei nidesi, the Central Bank of Cyprus (Athanasios Orphanides) warned that unless massive expenditure cuts, tax increases, may need to accept Cyprus sovereign debt relief. Christofias is required to clean up the mess, otherwise, Cyprus will be The next.

Lex column is written as FT critic combined some comments, incisive analysis of global economic and business

Translator/Wang Kelun

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