We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Cyprus's finance minister Michalis Saris arrives at the Russian finance ministry this morning, to meet his Russian counterpart Anton Siluanov. Misha Japaridze/AP

Cyprus turns to Russia for help after MPs reject deposit tax

While President Nicos Anastasiades meets party leaders at home, the finance minister heads to Moscow with cap in hand.

CYPRUS’S FINANCE MINISTER is travelling to Moscow today to discuss the possibility of a major loan from the Russian government, after the national parliament rejected a €10 billion bailout from the EU and IMF which involved a controversial tax on bank balances.

Finance minister Michalis Sarris – who yesterday revealed he had offered his resignation over the calamitous EU-IMF bailout deal, only to have it rejected – will meet his Russian counterpart Anton Siluanov.

The controversial deposit tax, an unprecedented part of Cyprus’s aid package, would have been a particular blow to Russian investors who are known to use the island as an offshore banking venue.

Cyprus already received a €2.5 billion loan from Russia two years ago, and has been looking to renegotiate the repayment terms and schedule on this loan. The rebuff of the EU-IMF’s €10 billion in new loans, however, could see Nicosia look to sound out the possibility of a larger second loan.

President Nicos Anastasiades will meanwhile hold an emergency meeting of party leaders to try and concoct a ‘Plan B’ after the parliament rebuffed the European plan – with even the 19 MPs from Anastasiades’s own Democratic Rally party choosing to abstain from the parliamentary vote.

Anastasiades said he ‘fully respected’ the parliamentary decision, and last night held a phone conversation with Russian president Vladimir Putin to discuss a potential response.

European offer ‘remains on the table’

Cyprus’s banks remain closed today – after an emergency bank holiday was declared for yesterday, following a more regular one on Monday – as authorities fear a run on deposits by worried householders trying to stop themselves from facing a future levy on their deposits.

The president of the Eurozone’s body of 17 finance ministers, Dutch minister Jeroen Dijsselbloem, issued a terse statement following the Cypriot vote merely confirming that the European deal remained on the table.

His German counterpart Wolfgang Schauble expressed greater dismay, and said a rescue plan for Cyprus could only work if it offered a credible way for Cyprus to “regain access to financial markets”.

“For now the debt is too high,” Schauble told a TV interview. “It must be reduced.”

Cyprus’s two main banks suffered badly when the Greek government partially defaulted on its loans last year, and now have a major capital shortfall.

The controversial banking levy, which was due to raise about €5.8 billion, would have raised enough funds to recapitalise the two banks. Depositors would have been given shares in the banks as compensation for their lost deposits.

A further €1.2 billion would have been raised by burning junior bondholders at those banks.

Read: British military plane takes €1 million to Cyprus

Your Voice
Readers Comments
    Submit a report
    Please help us understand how this comment violates our community guidelines.
    Thank you for the feedback
    Your feedback has been sent to our team for review.