Cyprus' Fundraising Needs Nearly Double

on April 12 2013 8:38 AM

The euro traded just below $1.31 on Friday morning as eurozone finance ministers gathered in Dublin for an informal meeting to discuss, among other things, the Cypriot bailout.

The bailout, which has caused outrage in Cyprus and many of its eurozone peers, originally required the tiny island nation to raise 7 billion euros on its own, and the European Union and International Monetary Fund would offer 10 billion.

However, Reuters reported that the aid package is now up to 23 billion euros and that Cyprus' responsibility will be nearly doubled at 13 billion euros.

In order to come up with the money, Cypriot lawmakers will need to sell gold reserves worth 400 million euros and raise corporate and capital gains taxes. Imposing a higher tax rate could be quite detrimental for the country, as analysts have predicted that the Cypriot economy will contract at least 12 percent over the course of the next two years.

The terms of the aid package have been agreed upon between the three parties, but could be adjusted as the details are finalized.

The ministers are also expected to discuss how to move forward on the unified banking system, which was agreed to last year. A unified banking system is hailed by many as the eurozone's first attempt at a long term fix for the financial crisis.

The next steps in implementing the system have come to a standstill, as the eurozone finance ministers struggle to agree on how the new banking structure will handle key crises in the future and how much control individual countries will have over their financial system.

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