22nd Oct 2016

Cyprus expects EU bailout deal in next 10 days

  • Cyprus ruins - will EU taxpayers' money be used to make sure Russian money-launderers do not lose their cash? (Photo: jnocca93)

With Greece (twice), Ireland , Portugal and Spain (its banks) already on the list, Cyprus expects to clinch an EU bailout of up to €15 billion next week.

Negotiations on details of the rescue start in Nicosia on Friday (9 November).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

A "troika" of international lenders - the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), led by commission official Maarten Verway - landed in the Cypriot capital on Thursday.

A Nicosia-based Cypriot source told EUobserver talks are expected to wrap up by Monday at the earliest or by the end of next week at the latest.

He said the big question is whether or not to split the bailout - likely to be in the range of €8 billion to €13 billion, with an absolute maximum of €15 billion - into two parts.

He said the IMF wants the EU's Luxembourg-based bailout fund, the ESM, to directly recapitalise Cypriot banks. The rest of the money would be a loan to the Cypriot government, as with Ireland or Greece. But the ECB wants the Cypriot exchequer to carry the whole burden.

He added the troika wants Cyprus to slash government spending in order to get back in the black. But Cyprus wants to boost income tax instead.

"For the troika to come to Cyprus now it means they are ready for an agreement," the contact said.

"The talks are just starting. It's too early to comment on them," a commission spokeswoman noted.

Cyprus got into trouble over its banks' exposure to Greek debt and because an explosion last year - literally, at an ammunitions dump and nearby power station - blew a hole in its budget.

It got a cheap €2.5 billion loan from Russia, an important financial partner, to help tide things over.

But prospects of extra Russian money did not materialise.

To make matters worse, its Russian connection caused embarrassment this week when the German foreign intelligence service, the BND, leaked a report to German magazine Der Spiegel saying Russian oligarchs and crime bosses have stashed €20 billion in Cyprus' banks.

Zooming in on one case, Hermitage Capital, a UK-based firm, has filed a complaint with Cyprus' attorney general to seize €24 million worth of Russian money on the island.

The firm says it was embezzled from Russian taxpayers by tax officials and that when its lawyer, Sergei Magnitsky, exposed the scam, he was tortured to death in prison.

For their part, the EU commission and Cyprus say only that Cyprus is a signatory to international anti-money-laundering treaties.

"It's a non-issue and it won't come up in the troika talks," the Cypriot contact quoted above said.

But for his part, Magnitsky's former employer, Hermitage Capital chief Bill Browder, says it is not OK.

"Corrupt Russian officials working together with organized criminals used Cyprus to launder a significant part of the biggest tax refund fraud in Russian history. We are looking forward to a robust investigation in Cyprus and seizure of the dirty money regardless of who is providing bailout funds to the country," he told EUobserver.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

News in Brief

  1. Canada and Wallonia end talks without Ceta deal
  2. Juncker hopes for Canada accord in 'next few days'
  3. Romania drops opposition to Ceta
  4. Difficulties remain on Ceta deal, says Walloon leader
  5. Brexit could lead to 'some civil unrest' in Northern Ireland
  6. ECB holds rates and continues quantitive easing programme
  7. Support for Danish People's Party drops, poll
  8. Spain's highest court overturns Catalan ban on bullfighting

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EASPDJoin the Trip! 20 Years on the Road. Conference & Photo Exhibition on 19-21 October
  7. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  8. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  9. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  10. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  11. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  12. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity