The FINANCIAL -- Eurogroup finance
ministers are studying the possibility of involving Russia in a bailout
deal to rescue a Cyprus economy teetering on the brink of ruin, Finance
Minister Vassos Shiarly said on Tuesday.
Shiarly told state radio that the European Union was trying to ascertain whether Russia was able to participate with international lenders in a financial aid package for Cyprus and how much it could contribute.
Officially Nicosia has only requested that a 2.5 billion euro loan payment -- received in 2011 from MOSCOW and scheduled to be paid back in 2016 -- be extended by five more years.
Shiarly said he expected a "positive outcome" on the repayment issue next month.
Eurogroup finance ministers made no decision on a rescue package for Cyprus at a meeting in Brussels last week because negotiations on bank recapitalisation are continuing.
The total amount is expected to reach 17.5 billion euros, but disagreements over conditions attached to the aid have prompted the EU to postpone a deal until after a presidential election next month.
Germany has also cast doubt over the bailout, criticising Cypriot banks as being havens for tax evaders and money launderers for Russian oligarchs.
A bailout decision is expected in March but Cyprus would need to wait longer for its first tranche of money as any deal must go through the various European parliaments.
As EUbusiness said, on March 1, a new Cyprus government will be sworn in following February 17 presidential elections in which communist incumbent Demetris Christofias will not stand.
Christofias is seen as an obstacle to agreeing more reforms -- such as privatising state-owned utilities -- that the EU and International Monetary Fund have been insisting upon.
He also tried to avoid a bailout deal with international lenders, preferring to opt for a five billion euro loan request from Russia which never materialised.
Shiarly said the government would be able to cover its financing needs until April without needing additional loans.
Cyprus has been seeking a bailout from the European Union and International Monetary Fund since June when its two largest banks sought assistance after exposure to toxic Greek debt.
Despite its small 17.5 billion euro recession-hit economy, there are fears that if Cyprus is allowed to default then it could trigger another crisis in the euro zone and risk the spread of contagion.
A forecast by Cyprus University economists predicts the austerity burdened economy austerity could shrink by an unprecedented 3.9 percent of GDP in 2013, higher than the government's own prediction of 3.5 percent.