Desperate for new deal

cash-strapped cyprus courts russia for bailout

NICOSIA — Cyprus pleaded for a new loan from Russia today to avert a financial meltdown, but won no immediate relief after the island’s parliament rejected the terms of a European bailout, raising the risk of default and a bank crash.

Finance Minister Michael Sarris said in Moscow he had reached no deal with his Russian counterpart Anton Siluanov, but talks would continue.

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

Cyprus has to seek Moscow’s help after the euro zone’s plan for a 10 billion euro bailout was cast into disarray on Tuesday when the island’s parliament rebuffed EU demands for a levy on bank deposits to raise ‚5.8 billion.

Moscow has its own interests in ensuring the survival of Cypriot banks, which have served as an offshore financial haven for Russian businesses and individuals.

The European Central Bank’s chief negotiator on Cyprus, Joerg Asmussen, said the ECB would have to pull the plug on Cypriot banks unless the country took a bailout quickly.

“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 recapitalization of the banking sector,” Asmussen told German weekly Die Zeit in an interview conducted on Tuesday evening.

Austrian Chancellor Werner Faymann said he could not rule out Cyprus leaving the euro zone, although he hoped its leaders would find a solution for it to stay.

Fuelling speculation

Cypriot officials disclosed that the country’s energy minister was also in Moscow, ostensibly for a tourism exhibition, fuelling speculation that access to offshore gas reserves could be part of any deal for Russian aid.

Cyprus has found big gas fields in its waters adjoining Israel but has yet to develop them.

“We had a very honest discussion, we’ve underscored how difficult the situation is,” Sarris told reporters after talks with Siluanov. “We’ll now continue our discussion to find the solution by which we hope we will be getting some support.

“There were no offers, nothing concrete,” he said. (Reuters)

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