INFORMED sources quoted by the Cyprus Broadcasting Service say that PIMCO is insisting on its worst-case scenario, which assumes a devaluation of properties by up to 65 per cent.
Under this assumption the banking system will need a total of €10.1 billion to raise its basic capital to the level required by the European Banking Authority. That amount would push the island’s total sovereign debt to an unmanageable level making a bailout deal even more difficult.
In a meeting with officials from the Cyprus Central Bank last night, PIMCO said that it does not consider that its baseline recapitalisation amount of €6.9 billion would be considered adequate by prospective lenders.
In other news it appears that the Cypriot government has been severely reprimanded by the troika for not implementing what has been agreed in the memorandum and its every move is now being closely monitored.
According to a report in Stockwatch, confidential documents from the Finance Ministry list detailed descriptions of deviations from the memorandum and negative comments by the troika on many of the points on which delays are apparent.
The documents show that the government has, so far, complied with only a minority of the agreed measures, and that even in these, there are serious gaps.
For example, the documents reveal large gaps in information that creditors have been given on important issues such as property tax. They believe that Cyprus has adopted the new tax, while the Ministry admits in the documents that the relevant legislation has not yet been approved, and has been postponed after the elections.