articles | 31 January 2013

Russia willing to aid Cyprus

Russia is prepared to contribute towards Cyprus’ bailout, along with the European Union, President Demetris Christofias said yesterday, as reports also suggested that German objections had weakened.

The island’s predicament was the subject of a phone call between Christofias and Russian President Vladimir Putin who expressed his country’s readiness tochip in, along with international lenders.

“President Putin assured me that the Russian Federation is ready to contribute withthe European Union in the financing of Cyprus," Christofias was quoted as telling reporters during a visit to Belgrade yesterday.

“The Russian finance ministry is in touch with the European Commission and I hope that this matter will soon close in a positive way.” Christofias said he spoke to Putin by phone on Tuesday evening. A government source told Reuters that Putin made the call.

Talks between Cyprus and international lenders have been complicated by the sheer size of the bailout, which could equal the €17.5 billion size of the Cypriot economy, and German misgivings about the island's commitment to financial transparency because of its close ties with Russia.

Christofias avoided getting drawn into a discussion concerning the debt’s sustainability following a bailout. “I just wanted to give this message to the Cypriot people. The details can be left to the experts. I strongly believe that this assistance can save us,” he said. The president was quick to add that that would not mean Cyprus would not meet its obligations concerning the structural changes it needs to put in place, and repaying potential loans.

It was not immediately clear what form any Russian assistance would take. Cyprus had requested a €5.0 billion loan from Russia last year, which Moscow has so far declined to grant. The island has also asked for a five-year extension in repaying a 2011 €2.5 billion loan to Moscow, to 2021, from 2016. Asked about the possibility of Russia granting Cyprus an extension on its five-year loan, German finance ministry spokesman Martin Kotthaus said any contribution from non-euro zone countries with a stake in Cyprus was welcome.

Last week, European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters he believed it was only fair Russia make a contribution to the bailout effort because of the significant Russian business presence on the island.

That presence has raised concerns in Germany, which claims that at least part of the Russian money in Cypriot banks could be illegal. However, it appeared that German opposition was weakening yesterday. A German newspaper reported that the EU paymaster was in the process of dropping its reservations following pressure from eurozone countries and the EU itself.

Sόddeutsche Zeitung said German Finance Minister Wolfgang Schauble continued to have reservations but the pressure from eurozone partners, the European Commission and the European Central Bank had become so high that Germany would eventually be willing to play along. The German government said yesterday the eurozone had not yet taken any decision on a bailout request from Cyprus while Berlin's own position has not changed since last week's meeting of finance ministers from the currency zone.

"There is no new position on Cyprus. Germany, just like its European partners, has not yet taken a decision on aid to Cyprus, neither in the positive nor the negative sense," said government spokesman Steffen Seibert.

Last week, Schauble questioned whether Cyprus was systemically relevant, though various EU officials have since stressed that letting Cyprus go bankrupt would have an impact on the common currency.

Unless a bailout was settled soon, the island could start causing wider problems, according to former euro group Chairman Jean-Claude Juncker. "If we don't definitively solve the problem case of Cyprus, there is a contagion risk even from this very small national economy," Juncker was quoted as telling Austria's Kleine Zeitung in an interview published yesterday.

Meanwhile, Cyprus has launched an international campaign to counter money laundering allegations. A parliamentary delegation yesterday discussed the matter in Brussels with the Vice President of the European Commission Olli Rehn, and with political groups of the European Parliament. During the meetings with thepolitical groups and Commissioner Rehn the delegation briefed the European officials on the current situation of the Cyprus economy, as well as on the Cypriot parliament’s commitment to adopt every measure in order to shed  the money laundering accusations.

Cypriot MPs told Rehn the island has nothing to hide and EU officials were more than welcome to visit Cyprus to evaluate the legal framework and its implementation.

Source: Cyprus Mail

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