Cyprus has moved a step closer to securing a €17.5
billion bailout from the Troika after it agreed on Monday to an independent audit
of its banks to assess implementation of anti-money-laundering rules. The audit was designed to address concerns
raised by some EU members that the Island may be being used as a haven for
money laundering particularly for wealthy Russians. Despite strong denials from the Cypriots, the
issue has been seen until now as a political stumbling block to securing a
rescue package, with the Germans in particular voicing concerns about hard
pressed EU members being asked to bail out a territory so that wealthy Russians’
bank deposits are protected.
Since the newly elected centre-right
President, Nikos Anastasiades, took over on 1st March from the
former communist-led government, there has been positive progress towards securing
a debt deal – something which has been rumbling on since last June, but which
is now becoming urgent as the tiny country comes close to running out of
money.
However, there are still some significant
issues to address. The IMF, one of the potential bailout lenders, is concerned
that a conventional rescue would push the Cypriot debt-to-GDP ratio up to an unsustainable
level of around 140% and as a consequence there is pressure for depositors in
Cyprus to help pay for the rescue, by a process known as a "bail-in". The Cypriots remain strongly opposed to this,
fearing that it could spark a withdrawal of funds from the country, making its
economic situation worse.
However, Anastasiades is believed to be more open to the
idea of a sale of some publicly owned assets to raise funds – something which
was opposed by his predecessor.
This will doubtless go down to the wire, but
the tone of messages coming from both camps has notably improved since the
elections.
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