Eurozone swells to discuss Cyprus bailout which is claimed will benefit Russian depositors in Cypriot banks

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3/15/13, "Eurozone finance ministers to discuss Cyprus bailout," BBC

"The bailout proposals are likely to contain a mixture of tax rises, one-off revenue-raising measures and plans to overhaul the island's banking sector.

In return, the European Union and International Monetary Fund would sanction a bailout worth up to 17bn euros ($22bn; £15bn).

Cyprus, heavily exposed to Greece's economy, has already bailed out banks.

Christine Lagarde, the IMF's managing director, will join eurozone finance ministers in Brussels for the talks. But it seems unlikely that the package will be signed off on Friday, with officials already making plans for another meeting next week.

"I can't give a prognosis on how far the finance ministers will get," German Chancellor Angela Merkel said. "Of course, swift negotiations are desirable, but things take as long as they do until they are solved with quality because we need a sustainable solution."...

There is speculation that Russia could help finance the bailout by extending a 2.5bn-euro loan already made to Cyprus. It has been reported that Cypriot Finance Minister Michael Sarris will travel to Moscow for meetings on Monday.

There are a lot of Russian deposits in the Cypriot banking system, according to economists.
Jacob Funk Kirkegaard, of the US-based Petersen Institute for the International Economics, said that was a potential problem for any bailout negotiations.

"There is a general political sentiment that it is not acceptable to be bailing out a country, and thereby putting European taxpayers' money at risk, to basically protect Russian depositors in Cypriot banks," he said.

The Cypriot economy accounts for barely 0.2% of the eurozone area's overall output. But there is concern within the euro bloc that a default by Cyprus risks undermining the progress being made in Greece.

Eurozone officials have been working throughout Friday to finalise the rescue package, which will go before finance ministers at a meeting due to start at 16:00 GMT."

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