Cyprus the Latest Debt Crisis Victim

Cyprus became the fifth euro-zone country to require a bailout today — further proof that no one is safe from the contagion that is the sovereign debt crisis.

Cyprus Finance Minister Vasos Shiarly testified before parliament today that the country is in “exceptionally urgent” need of an international bailout. If granted, Cyprus would become the fifth country in the debt-riddled region to need a bailout after Greece, Portugal, Ireland and – just last weekend – Spain all asked for and received financial aid.

Cyprus is asking for financial help so that it can recapitalize its struggling banks by the end of June. The country has yet to issue a formal request, but will likely do so soon if it hopes to receive bailout money before the end of the month.

Cyprus is the third smallest economy in the 17-nation euro zone, so a bailout of its banks won’t put too much of a dent in the European Financial Stability Facility’s 125 billion-euro coffers. But it is yet another clear sign that the debt crisis that started in neighboring Greece is spreading like wild fire throughout the euro zone.

The Central Bank of Cyprus estimated last week that the country’s economy could shrink by as much as 1.1% this year. The country’s unemployment rate is forecast to reach 10.1% this year and 10.8% in 2013.