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Russian, Cypriot finance minister agree to restructure Russian loan

July 11, 2013, 6:31 UTC+3

Apart from that, the interest rate was reduced from 4.5 percent to 2.5 percent. It means that Cyprus will be able to save about 200 million euro

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NICOSIA, July 11 (Itar-Tass) - Russia and Cyprus have practically agreed to restructure the 2.5-billion euro loan extended by Moscow at the end of 2011, Russian Ambassador to Cyprus Vyacheslav Shumsky said on Wednesday in an interview with local television company Sigma.

“The repayment of the debt will be adjourned for five years - from 2016 to 2021,” the Russia diplomat noted. “Apart from that, the interest rate was reduced from 4.5 percent to 2.5 percent. It means that Cyprus will be able to save about 200 million euro.”

Speaking with Itar-Tass, Shumsku explained that the Russian finance ministry has drafted and handed over to the Cypriot finance ministry a draft agreement on the loan restructuring. “They have analyzed it and confirmed that they are ready to sign it,” he said. “Now it is being agreed where and when the agreement will be signed.”

Back in January 2013, Cyprus officially asked Russia to postpone the loan repayment date. The loan was issued to the former government of Demetris Christofias to help Cyprus’ banks overcome financial strains following Greece’s debt crisis. The bilateral agreement was signed in December 2011. Under the agreement, Cyprus received a 2.5 billion euro loan at 4.5 percent interest rate for the term of 4.5 years.

However, by mid-2012 it became obvious that the loan will not be enough to get out of the financial crisis, since in line with the European Union requirements, Cyprus’ leading banks needed recapitalization. On this background, the Cypriot authorities had to ask help from their partners in the Europgroup and the International Monetary Fund.

The issue of possible revision of the Russian loan terms has been discussed more than once in the context of the preparation of the anti-crisis program of the European Union and the International Monetary Fund for Cyprus. The Russian side repeatedly said it was ready to join assistance to Cyprus only after Cyprus reached an agreement on financial assistance with European Union partners.

In March 2013, the talks between the new government appointed by Cyprus’ just elected President Nicos Anastasiades with the three international creditors (the European Commission, the European Central Bank, and the International Monetary Fund) yielded a memorandum on the terms of a ten-billion-euro loan. The loan’s first tranche reached Cyprus in mid-April.

In May, Cyprus’ Minister of Finance Charis Georgiadis said in an interview with Itar-Tass that he had issued “an official written request to the Russian minister” about possible loan restructuring. “I explained that we have completed work on the memorandum with the three creditors and enrolled assistance from our European partners. Now we are waiting for support from Russia, in line with these agreements,” he then said.


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