Russia agreed to restructure a 2.5 billion-euro ($3.3 billion) loan granted to Cyprus in 2011, bowing to request by the European Commission, President Vladimir Putin said.
“We are making our own contribution” to help the island, Putin told reporters today at a joint briefing in Hanover with German Chancellor Angela Merkel. “At the request of the European Commission, we decided to restructure this debt.”
Russia, which rejected a bid from Cyprus for additional financial assistance last month, has bristled at suggestions that it was responsible for bailing out the euro member as politicians from nations including Germany alleged that Cyprus was used to launder illegal Russian money. Restructuring terms sought by Cyprus would amount to a 10 percent writedown of the loan, according to Russian Finance Minister Anton Siluanov.
Russian companies and individuals have an estimated $31 billion in Cyprus, according to Moody’s Investors Service. The bailout of the cash-strapped nation will probably provoke an outflow of Russian money back home, Putin said last week.
Cyprus, which accounts for 0.2 percent of the euro region’s economy, was forced to inflict unprecedented losses on uninsured depositors and senior bondholders as part of the 10 billion euro rescue of its financial system.
The east Mediterranean nation has officially asked Russia to extend its 2.5 billion-euro loan by five years to 2021, the Nicosia-based Finance Ministry said Jan. 10. The euro area’s third-smallest economy borrowed the funds in December 2011 and has also sought an additional 5 billion euros from Russia.
Agreeing to a five-year extension and a cut in the interest rate from 4.5 percent to 2.5 percent would amount to “decent support” for Cyprus, Siluanov said last month. Putin didn’t disclose the terms of a new credit agreement with Cyprus.
The Russian leader, who berated an earlier rescue plan that affected insured savers as “unfair, unprofessional and dangerous,” urged European authorities today to avoid imposing a levy on bank deposits again.
“We assume that it’s a unique case, that such means of exiting the crisis in problem areas of the euro region won’t be used again,” he said.