Cyprus says Russia "ready" to join bailout

Cyprus says Russia "ready" to join bailout
# 30 January 2013 21:32 (UTC +04:00)

Baku-APA. Russia has given assurances that it is "ready" to take part in a Cyprus bailout package and will also assist by extending a 2.5-billion-euro (3.4-billion-U.S. dollar) loan, Cypriot President Demetris Christofias said on Wednesday, APA reports quoting Xinhua.

Christofias was commenting on a Kremlin announcement that President Vladimir Putin had on his own initiative a telephone conversation with Christofias on Tuesday night, during which they discussed financial issues and cooperation between the two countries.

"President Putin assured me that the Russian Federation is ready to contribute with the European Union in lending Cyprus," Christofias told Cypriot journalists while visiting Belgrade for talks with his Serbian counterpart Tomislav Nikolic.

Cyprus requested financial support from the EU and the International Monetary Fund when its two largest banks asked for state funds to recapitalize, after they suffered heavy losses because of depreciation of Greek bonds held by private investors by almost 75 percent.

Christofias said his conversation with President Putin was very friendly and concerned the economic situation in Cyprus and the possible participation of Moscow in the bailout program, which has yet to be finalized by the EU.

"It is natural for the Russian Federation to want Cyprus to receive loan support from the European Union and at the same time, as an old friend of Cyprus, to be willing to help in cooperation with EU," Christofias said.

Russian Prime Minister Dmitry Medvedev said in an interview with a German newspaper on Monday that Russia could provide support to Cyprus, provided the island itself and the EU would shoulder the biggest share in a potential bailout.

Russia and Cyprus enjoy traditionally friendly relations based on decades-old close political cooperation and also on common cultural and religious factors.

Russian deposits in Cypriot banks at the end of 2012 stood at about 16 billion euros out of a total of 21 billion euros of deposit money from countries outside the EU. Cyprus also features second in foreign investments in Russia.

These two facts have given rise to allegations about money laundering in Cyprus, a charge which is vehemently denied by the island's authorities and also by the European Commissioner for Taxation and Customs Algirdas Semeta.

Money laundering charges against Cyprus are mainly voiced by German politicians, whose opposition to the Cyprus bailout is blocking the conclusion of a provisional deal reached late last year.

The deal is for about 17.5 billion euros - equal to the island's annual economic turnover - out of which a provisional amount of 10 billion euros have been earmarked for recapitalizing the banking system.

Yet unconfirmed reports say that international auditors who carried out a due diligence of the banks are to announce on Thursday a final figure of 8 billion euros.

If confirmed, the news will cause deep sighs of relief in Cyprus as this would mean that the total sovereign debt will be kept down to a manageable level, making unnecessary additional austerity measures.