Russia to bailout Cyprus after MPs reject EU deal?

A protestor in front of the parliament building holds a placard showing German Chancellor Angela Merkel after the Cyprus Parliament rejected the bailout deal, Nicosia, Cyprus, 19 March. The parliament in Cyprus Tuesday rejected the proposed tax on bank deposits, with 36 of 56 deputies voting against the measure while 19 abstained: EPA/FILIP SINGER

"The situation is really dramatic in Cyprus [...]. Of course, European Union aid packages are voluntary but they have to live with the consequences [of not accepting them],” Foreign Minister Radek Sikorski said after yesterday’s vote by MPs in Nicosia, who unanimously rejected the proposed 10 billion-euro EU and IMF bailout.

Cyprus was expected to raise 5.8 billion euros through the one-off tax on bank savings but public anger at the move led MPs to reject the offer.

Poland’s foreign minister said that “as I know the [Cypriot] Minister of Finance has gone to Moscow. This will be a test of Cypriot-Russian friendship and we hope that the Russian Federation will support the Cypriot banking system,” Sikorski told journalists on Wednesday.

Around half of all bank deposits in Cyprus are made by foreign nationals, including Russians, taking advantage of the low taxes.

Cypriot Finance Minister Michael Sarris said today he had not reached a deal at a first meeting with his Russian counterpart Anton Siluanov in Moscow, but talks there would continue.

Russia's finance ministry said Nicosia had sought a further 5 billion euros, on top of a five-year extension and lower interest on an existing 2.5 billion euro loan.

"I'll keep fingers crossed for someone to help Cyprus,” Minister Sikorski added. “There is an offer on the table but Cyprus is a sovereign country and has the right to use it or not."
The European Central Bank's chief negotiator on Cyprus, Joerg Asmussen, said the European Central Bank would have to pull the plug on Cypriot banks unless the country took a bailout quickly, Reuters reports.

"We can provide emergency liquidity only to solvent banks and […] the solvency of Cypriot banks cannot be assumed if an aid programme is not agreed on soon, which would allow for a quick recapitalisation of the banking sector," Asmussen told German weekly Die Zeit. (pg)

Source: PAP