Cyprus €17bn debt threats to derail eurozone

European Union officials have warned of another eurozone threat as Cyprus faces impending debt defaults.

Latest figures show Cyprus is in need of €17bn bailout, which is about the size of its gross domestic product, mainly because of the effect that the Greek sovereign debt restructuring has had on its banking sector.

European Financial Stability Facility (EFSF) chief executive Klaus Regling told French newspaper Le Figaro: “We need a decision or else it risks a threat to the eurozone.” His comments came ahead of next month’s meeting of EU leaders to discuss the plans for a Cyprus bailout.

Ratings agency Standard and Poor’s said on Wednesday that Cyprus faces “a material and rising risk” of defaulting on its sovereign debt, particularly if aid is not brought in quickly.

Regling also spoke of Italy’s looming threat of default, adding it could become a “subject of uncertainty” if the country does not urgently pursue economic reforms.

Moreover, Regling noted, all countries in the eurozone have the unlimited backing of financial leaders after European Central Bank president Mario Draghi pledged “whatever it takes” to save the single currency in mid-2012.