Cyprus Eyes 2015 Market Return

Cyprus' President Nicos Anastasiades.

NICOSIA – Only a year after asking for an international bailout, the Cypriot government is already considering a cautious trial balloon market return in 2015 to see if investors will bite on buying the country’s debt, President Nicos Anastasiades said.

In an exclusive interview with Reuters, he said that an “economic dependency” on Russia – common with other EU member states – could have an impact should the bloc decide to tighten sanctions on Moscow in its standoff with Ukraine.

He also said there should be offsetting measures for those countries whose economies could be directly hit if the crisis escalates and further sanctions are imposed. That could include leaving it to the discretion of member states over what additional curbs to apply, he said.

Last year the Cypriot economy and banking system was on the edge of default, caused by bad loans to failed Greek businesses and big holdings in devalued Greek bonds, combining for a 4.5 billion euro loss.

That left the government unable to borrow from the private markets and led Anastasiades to seek a 10 billion euro ($13.86 billion) rescue from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).

That came with a condition that the government find or cut another 13 billion euros ($18.03 billion) because the lenders feared the debt would otherwise be unsustainable.

Cyprus seized 47.5 percent of bank accounts over 100,000 euros ($138,700) and implemented strict capital controls, limiting depositors to daily withdrawals of only 300 euros ($416) but said those will mostly be lifted by the end of this year.

Cyprus lost a foothold in markets in May 2011 after yields on benchmark 10-year bonds spiked rapidly. But from a high of close to 15 percent last March, yields have now tumbled, quoted at 5.13 percent on April 9, according to Reuters Eikon data.

“We hope to be in a position to enter the markets towards the end of 2015. It is a very short period of time compared to countries under similar (bailout) programs,” said Anastasiades, who assumed the presidency last year just two weeks before being catapulted into handling the island’s worst peace-time crisis since independence from Britain in 1960.

Asked if the republic could consider putting out feelers with a small issue beforehand, Anastasiades said that could be considered taking into account a further reduction in spreads.

“It is something which we could look at, at a time when we feel it would be successful to try,” he said.

“I believe we are on the right path…we have managed to overturn forecasts which were considerably worse than what we eventually achieved,” he said.