Cyprus and its bailout got a new fan. The International Monetary Fund will contribute one billion euros to the cause. The action may not be much of a risk short term, and Cyprus has seized billions of euros in bank deposits to ensure it own financial health, no matter how shaky.
The risk will come as the Cyprus recession deepens. Gross domestic product is forecast to drop as much as 10%, which would put the viability of Cyprus’s finances in extreme danger.
According to Marketwatch:
Cyprus and the International Monetary Fund on Wednesday finalized an agreement that will see the institution supplement a 9 billion euro ($11.5 billion) rescue package from its euro-zone partners with a 1 billion euro lifeline, the IMF announced. Under the terms of the agreement, deficit-reduction efforts already under way– estimated at around 5% of GDP — will be supplemented by measures worth an additional 2% of GDP. That includes a hike in the corporate income tax rate to 12.5% from 10% and the tax rate on interest income from 15% to 30%.
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