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Russia to restructure its multibillion euro loan to Cyprus

Russia to restructure its multibillion euro loan to Cyprus

PanARMENIAN.Net - Russia has decided to restructure its multibillion euro loan to Cyprus to help the island nation resolve its financial crisis, President Vladimir Putin said on Monday, April 8, according to RIA Novosti.

“We are making our own contribution [to resolving the Cyprus crisis]. Late in 2011 we granted Cyprus a government loan of 2.5 billion euros [$3.2 billion], and at the request of the European Commission we have decided to restructure this debt. This is our real contribution to resolving the Cyprus problem,” Putin said, without giving details of the debt restructuring.

In talks between the Russian and Cypriot finance ministers in March, Cyprus requested a five-year loan extension and a cut in the loan rate from 4.5 percent to 2.5 percent, which was equivalent to writing down 10 percent of Cyprus' debt.

Russia does not expect the Cyprus bailout model offered by the troika of international creditors will be used to resolve the economic woes of other eurozone countries fighting with the sovereign debt and bank liquidity crises, Putin said.

“We spoke about the Cyprus issue in detail,” Putin said when commenting on the results of his visit to Germany where he met with German Chancellor Angela Merkel.

“I proceed from the fact that this [the terms of the Cyprus bailout deal] is single instance and such methods to exit the crisis will not be used any more in the problem eurozone countries,” Putin said.

Cyprus has had to agree to overhaul its bloated banking sector and introduce "haircuts" for bondholders and savers with accounts of over 100,000 euros in the country’s two biggest banks in return for the much-needed 10 billion euro ($13 billion) bailout from the European Union, the European Central Bank and the International Monetary Fund.

Under the rescue deal, Laiki Bank, the country’s second largest lender, will be broken up and its deposits of less than 100,000 euros will be moved into the Bank of Cyprus, the country’s largest bank, which will be restructured. Laiki Bank’s deposits of over 100,000 euros will be frozen and used to resolve its debts while depositors with more than 100,000 euros at the Bank of Cyprus could face losses of up to 60 percent on their savings.

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