Cyprus shops around for 'best' bailout

Cyprus shops around for 'best' bailout
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Financial officials from Cyprus have been discussing the Mediterranean island’s money troubles in Moscow. The European Union is not comfortable with one of its members considering a bailout from the Russians. The way some commentators see it, Berlin has said if Cyprus goes through with that it can kiss its membership of the euro group goodbye.

Now that the Cypriot parliament has rejected EU aid plan conditions, it is supposed to come up with an alternative.

Russians who have made a home on Cyprus suggest the choice is obvious.

Ready to fly there after visiting Moscow, one Russian traveller said: “Cyprus needs to be more careful. As far as it is concerned, the EU just isn’t as financially reliable as Russia. I’ve lived in Cyprus for a long time. I know. There are lots of Russians there.”

Around 2,400 kilometres from Moscow lies Limassol, a prime example of this in Cyprus. Russian stores, banks, even Russian schools stand out here. And the EU’s bailout proposal has a lot of the island’s newcomers feeling nervous and possessive. Collectively, they would have to pay out millions of euros if the contents of their bank accounts are taxed.

“Cyprus is our country, we believe,” said a Russian woman who has opened a supermarket. “I’ve lived here for 16 years. But this country has deceived us! It has stolen our money – just stolen it! It wasn’t this country’s money; we brought it with us; we didn’t earn it here!”

Cyprus has been a major beneficiary of exported Russian capital. By some estimates it amounts to well over 40 billion euros in value – 27 billion of it considered by some experts to have come in illegally. Russian funds represent one third of the total foreign investments here. In the other direction: one fifth of foreign investment in Russia appears to come from Cyprus.

Zsolt Darvas, a Research Fellow at the Bruegel Institute, said: “At the end of the day an agreement has to be reached between Cyprus and European partners unless Russia steps in and buys up the whole island. The key question is how to distribute these losses. Russia would be able to absorb it, and could gain much more political and economic influence, for example over recently discovered gas fields in Cyprus.”

In exchange for rescuing the island financially, Moscow is notably interested in a stake in the offshore resources. These lie between Cyprus, Lebanon and Israel. But Turkey is adamant that it and the self-declared Turkish Republic of Northern Cyprus (recognised only by Ankara) have legitimate claims, too.

All these players are crowding round as if at a blackjack table.

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