NICOSIA, July 4 (Reuters) - The cost of bailing out Cyprus' banks, weakened by exposure to Greece, could hit 10 billion euros, a newspaper reported on Wednesday, referring to preliminary estimates by IMF officials visiting the island.
The figure, cited by the well respected daily newspaper Phileleftheros, is in line with initial estimates of the total cost of rescuing the island's economy.
If confirmed, it would thus represent a sharp jump in even pessimistic estimates of how much fresh cash the banks alone would need.
It would also raise issues of debt sustainability, given Cyprus' annual economic output stands at just 17.3 billion euro GDP.
The Central Bank declined to comment, describing any figures mentioned in the press as "purely speculative".
Cyprus requested emergency financial aid from its EU partners last week.
A team of IMF, European Commission and ECB officials arrived on the island on Monday and started consultations on Tuesday. The assessment on banks was made by another IMF team already on the island, which briefed the central bank on Tuesday, Phileleftheros said.
Cyprus's two major banks booked substantial losses from writedowns in the value of holdings of Greek sovereign debt, taking a 4 billion euro combined hit.
Cyprus Popular has now been effectively nationalised with a 1.79 billion euro recapitalisation from the state, and Bank of Cyprus has requested 500 million euros in state aid.
Fitch had last week said the recapitalisation costs of Cypriot banks could be in the region of 6 billion euros, but acknowledged the estimates were subject to uncertainty and were conservative.
In making its assessment, the IMF was taking into consideration higher provisions of banks for non-performing loans. It was considering loans as such for 90 days-plus of repayment delays even if they were backed by collateral, Phileleftheros said. (Reporting By Michele Kambas; Editing by John Stonestreet)