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Wednesday, Jan 30, 2013 1:00 PM UTC

Cyprus president: Russia ready to help in bailout

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Topics: From the Wires,

NICOSIA, Cyprus (AP) — Cyprus’ president said Wednesday that Russia is ready to join the European Union in putting together a rescue package for the heavily indebted country.

Dimitris Christofias said that his Russian counterpart Vladimir Putin assured him of Moscow’s readiness to “extend a helping hand” to Cyprus in a telephone conversation the previous day.

Christofias didn’t specify how much Russia would offer, but said this help could “save” the country.

“It’s natural for the Russian Federation to want Cyprus to receive a loan from the EU because it’s a member. But at the same time, as an old friend of Cyprus, it would like to help in cooperation with the EU,” Christofias told reporters in Belgrade, adding that he’s hopeful EU-Russia talks on the issue would be successful.

Christofias said that Cyprus would stick to bailout obligations to reform its economy, even with Russian help.

Cyprus’ Finance Minister Vassos Shiarly told the Associated Press in an interview Monday that Russia’s contribution to a Cyprus bailout was “probable” and only a “question of time.”

Cyprus is trying to finalize with its euro partners a bailout of as much as €17 billion ($22.8 billion) — roughly equal to its annual gross domestic product — to prop up its ailing banks and flagging economy. That amount has raised questions over whether Cyprus could pay off any rescue loan, as its economy is projected to shrink by more than 3.5 percent of GDP and a jobless rate of 14 percent.

A draft of the bailout deal puts the recapitalization needs of Cypriot banks, which were hit hard because of their exposure to bad Greek debt, up to €10 billion. But Cypriot officials insist the banks’ real needs are significantly lower than that.

Cyprus received a low-interest, €2.5 billion loan from Russia in 2011 when it could no longer borrow from international markets. It has formally asked to extend repayment of the loan from 2016 to 2021. The country sought another €5 billion from Moscow last year without result.

Cyprus’ close ties with Moscow stretch back decades. Most of the €24 billion Cypriot banks hold in non-resident deposits comes from Russia, while billions in Russian money is reinvested back into the country through Cyprus.

Those ties have given rise to allegations, mainly from Germany, that Cypriot banks are laundering dirty Russian cash and are acting as havens for tax dodgers. Cypriot officials insist the country gets high marks from international anti-money laundering organizations. But German opposition politicians are insisting they see the results of an independent audit of the Cyprus’ banks before they approve any bailout.

“The results of the audit need to be made available before the German Parliament votes on the aid package for Cyprus. Promises to improve things alone aren’t enough. We deputies need to know what we are voting on,” said Joachim Poss, deputy parliamentary chairman of the opposition Social Democrats (SPD) in a statement.

____

Frank Jordans in Berlin contributed.

More By Menelaos Hadjicostis.

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