Cyprus may need bailout after munitions blast

Central bank governor Athanasios Orphanides has warned that Cyprus could be headed for a bailout following a massive munitions blast that claimed 13 lives and knocked out a key power plant. Dow Jones Newswires on Wednesday quoted a letter sent by Orphanides to Cypriot President Demetris Christofias in which he warns that the Cyprus economy is in a state of emergency. "To avoid the worst, including admission into a support mechanism, further and more drastic measures must be taken immediately," Orphanides, a member of the European Central Bank's governing council, said in the letter. Political leaders are due to meet with Christofias on Friday to discuss economic measures to take in the wake of the explosion. Christofias is struggling to keep his government from imploding in the aftershock of the July 11 blast at a naval base, with the defence and foreign ministers already having resigned and the junior government partner considering pulling out altogether. The president is at the same time assailed by unprecedented public protest over perceived administration incompetence. Rebuilding the power plant and importing energy is expected to cost up to one billion euros (1.4 billion dollars). Former finance minister Michalis Sarris told AFP the economy will take around two years to recover, estimating zero GDP growth this year instead of the projected 1.5 percent.