Cyprus eyes EU option to shore up banks The Cypriot finance minister said on Friday that his preferred option to shore up the island's banking sector was to seek help from Europe, highlighting the limited time and choices available if it is to meet capitalisation rules that take effect in little more than a week. Vassos Shiarly's comments come after weeks in which Nicosia signalled that it would prefer to look for bilateral help from a country such as Russia, which has already lent it €2.5bn this year, rather than approach the EU for help, a course of action likely to involve stringent conditions. "The more options you have the better it is," Mr Shiarly told CNBC. But obviously a European Financial Stability Facility loan is preferable. His remarks come amid growing expectations that there is little option for Cyprus other than to go the EFSF. There is now just over a week left for Cyprus Popular Bank, the island's second-biggest lender, to secure, at least €1.8bn to meet EU bank capitalisation rules that come into effect on June 30, leaving the island only days to find the necessary funds. Cyprus also takes up the EU's rotating presidency on July 1. There has been little visible progress on a new Russian loan, despite strong ties between Moscow and Demetris Christofias, Cyprus's communist president. Sergei Storchak, Russia's deputy finance minister, said on Thursday that Moscow had not received any request for financial help from Cyprus, although any such move would be considered. Mr Shiarly still held out the possibility of Russian aid, however, and some observers suggest that Cyprus could separately ask Moscow for help with repaying more than €2bn of government debt that falls due next year. Referring to Popular Bank, the finance minister said: "We have one distressed bank which needs to be recapitalised and the government of Cyprus has shown its determination to do that . . . we will need some assistance and that will have to come from either an application of the EFSF or the European Stability Mechanism or a bilateral loan." A further concern for Cyprus is that while Popular Bank needs capital urgently to rebuild its balance sheet after last year's writedown of Greek sovereign debt, Cypriot banks collectively also hold €22bn in Greek private sector debt - assets that could be further hit by non-performing loans, or, in the event of a Greek exit from the euro, devaluation. As a result, some economists say that Cyprus needs far more than €1.8bn for Popular Bank, suggesting figures closer to €10bn. Cyprus officials argue that they would prefer EU assistance for the banking sector alone, rather than a wider-ranging programme that would give the bloc much more leverage over the economy as a whole and set conditions for the island to meet. But EU officials have signalled little patience for such arguments. That may cause difficulties for Mr Christofias, who earlier this month announced to civil servants that "neither their bonus, nor their pension is at risk, nor will new measures be taken against workers . . . at least as long as I am president."