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Russia considers restructuring of Cyprus’ debt – Finance Minister

February 04, 2013, 14:52 UTC+3

A month earlier, Cyprus’ government asked Russia officially to extend for five more years the payback of the loan of 2011

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SOCHI, February 4 (Itar-Tass) – Russia considers restructuring of Cyprus’ debt.

“/Cyprus/ has addressed us for a new loan and for better conditions for the earlier loan,” Russia’s Finance Minister Anton Siluanov told reporters on Monday. “We are ready to consider rather the second option.”

He explained that Russia was ready to consider “restructuring of the debt and lowering the interest rate.” Siluanov stressed that “Russia’s efforts will not be able to rescue Cyprus, which will not be able to do without assistance from the European Union.”

A month earlier, Cyprus’ government asked Russia officially to extend for five more years the payback of the loan of 2011. Under the agreement signed back then, Cyprus received a loan of 2.5 billion euros, where the interest rate was 4.5 percent for the term of 4.5 years. The loan was due for payback by July, 2016.

However, by mid 2012, it was clear that the means would not be sufficient to overcome the financial crisis, as the country had to recapitalise its leading banks, following instruction from the European Commission. The Cyprus authorities addressed Russia for another loan of five billion euros and at the same time had to ask aid from counterparts in Europe and at the International Monetary Fund. The Russian side agreed to help, but exclusively in coordination with the EU countries.

The question about delaying payback of the Russian loan emerged after the November agreement between the Cyprus officials and the “Three” international lenders /the European Commission, the European Central Bank and the International Monetary Fund/ on the financial aid of about 17.5 billion euros, where about ten billion were to be used for bank restructuring. However, Cyprus’ counterparts at the European Council and the International Monetary Fund decided to postpone a final agreement of the memorandum on the assistance programme and on allocation of funds due to certain problems, where the main one being the concern about Cyprus’ ongoing foreign debt if the country receives an aid equal to the country’s GDP per year. Presently, there are several suggestions how to make the debt payable, including privatisation of state-run companies and restructuring of the Russian loan.

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