Cyprus could ask for a bailout from European Union partners if the government deems it would be good for the island's recession-hit economy, its central bank chief said on Friday.
One of the euro zone's smallest economies, Cyprus has been stuck in recession after a munitions disaster last year destroyed its largest power station, hurting business activity. Its budget is also strained by the exposure of its banks to near-bankrupt Greece.
"We should not rule out anything as long as this can benefit the economy," central bank Governor Panicos Demetriades told reporters after a meeting with Nicos Anastassiades, the leader of the main opposition party Democratic Rally.
"Anything that is done must be done for the good of the economy, the good of the banking system," he said.
Wary of the experience of debt-stricken Greece and keen to maintain its coveted low-tax status for businesses, Cyprus has so far done its best to avoid turning to its euro zone partners for any financial aid.
It received a 2.5 bln euro loan from Russia in late 2011, disbursed in three tranches from December 2011 to April 2012.
Failure to meet self-imposed deficit targets and the exposure of its banks to Greece has meant the island has been shut out of international capital markets for a year. The island's credit ratings have been cut to junk by two of the world's three ratings agencies.
Last week its parliament cleared emergency legislation for the state to underwrite a 1.8 bln euro ($2.3 bln) equity issue by Cyprus Popular Bank, which is heavily exposed to Greek debt.
Popular was hurt by writedowns resulting from a sovereign debt swap this year to reduce Greece's debt mountain.
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