Putin supports Cyprus bail-out
Russian President Vladimir Putin gave his support to the Cyprus bail-out deal, the Kremlin announced, March 25.
“Putin considers it possible to support the efforts of the president of Cyprus, and the European Commission, aimed at overcoming the crisis in the banking system of this island state […],” Kremlin spokesperson Dmitry Peskov, said according to U.K daily The Telegraph.
The European Union, European Central Bank and the European Commission held their breaths as the Cypriot government sat down to re-vote on the proposed levy on deposits, created as a condition for a EU bail-out of the country’s ailing economy.
The subsequent deal was cautiously supported by the Russian President despite it being Russian investors who will be most hit by the measures that the Cypriot government plans to take.
Under the new deal Cyprus will protect all deposits under EUR 100,000, whereas accounts containing funds over that sum, which are not guaranteed by the state, will be used as bail-ins. Cyprus’ failing Laiki Bank will be divided into the so-called ‘good bank’ and ‘bad bank.’ The smaller accounts will be transferred to the ‘good bank,’ which will subsequently be incorporated by the Bank of Cyprus – the country’s number one financial institution in terms of size.
The larger accounts in the ‘bad bank’ will be used to erase Laiki bank’s debts. Cypriot financiers estimate that the larger accounts – most of which are Russian, according to the media – may lose some 30 per cent in funds.
It is estimated that the bail-in will raise some EUR 4.2 bln.
While Peskov indicated that Russia plans to restructure its EUR 2.5 bln loan, given to Cyprus in 2011. The country’s Prime Minister Dmitry Medvedev, took a different line to Putin saying that “they [Cyprus] are continuing to steal what has already been stolen,” according to Russian news agency Interfax.
Russian corporations and individuals hold an estimated EUR 20 bln–EUR 25 bln in Cypriot banks, approximately a third of the total deposits on the island.