NICOSIA - Cyprus gave a hint on Friday that it was closer to finding cash urgently needed to recapitalise its second largest bank by the end of this month, but kept markets guessing where the money would come from. The government said in a statement it was "working away from the glare of publicity" to find the money. Closely tied to its troubled bigger neighbour Greece, Cyprus faces the prospect of following Greece, Portugal, Ireland and Spain in requesting a bailout from its EU partners. However, it could also look for aid in a the form of a bilateral loan, possibly from Russia. "The President of the Republic will soon meet with political parties to brief them and discuss issues concerning efforts to deal with the challenges that lie ahead for our country," government spokesman Stefanos Stefanou said in a written statement. The statement did not explain when that meeting would take place. Stefanou was not immediately available to clarify further. Cash-starved Cyprus faces the prospect of bailing out its second-largest lender with 1.8 billion euros - the equivalent of about 10 percent of its GDP - if the bank, Cyprus Popular, cannot raise the cash privately by the end of the month. The bank's balance sheet was damaged after it wrote down the value of its holdings of Greek government debt in the wake of a huge restructuring this year aimed at bailing out Athens. If the Cyprus government must fund the money it would either have to resort to the European Financial Support Facility (EFSF), secure a bilateral loan, or some combination of the two. Opposition parties say the authorities are dragging their feet on fiscal measures needed to shore up the economy before seeking aid. Stefanou rejected such accusations, saying they send "the wrong message about the economy of Cyprus, which, despite its problems is in a better state than the economies of many other countries in the European Union." Cyprus Popular needs to replenish its core tier 1 capital - an indicator of financial strength - to 9 percent by a June 30 deadline set by European banking regulators, which means any bailout must come by then. Cyprus is urgently watching the outcome of elections on Sunday in Greece, which European leaders fear could lead to Athens eventually leaving the euro zone. Were that to happen, banks in Cyprus would face much greater damage - potentially running above 10 billion euros - crippling for a tiny country with just 1 million people.
