Published July 05, 2012
NICOSIA, Cyprus – Cyprus' president on Thursday defended his government's decision to seek financial aid from the island nation's eurozone partners while at the same time asking for a loan from Russia, insisting that the two are perfectly compatible.
Dimitris Christofias said he sees nothing wrong with simultaneously pursuing a loan from Russia that may come with better terms than a European Union bailout.
"I don't think it's a sin for a country to ask for a loan from another, friendly country, or that it needs to apologize," Christofias told journalists during a briefing.
Christofias brushed aside concern over Cyprus' close relations with Russia. He called Russia a "strategic partner'" of Europe and a "pillar of capitalism."
Cyprus, with a population of 862,000 people, last week became the fifth country that uses the euro currency to seek a European bailout in order to prop up its large, Greece-exposed banking sector.
The country is currently in talks with the so-called 'troika' — the body made up of officials from the European Commission, the European Central Bank and the International Monetary Fund — on how much bailout money it will need and the conditions that will come attached.
Locked out of international markets because of its junk credit rating status, Cyprus is paying its bills thanks to a €2.5 billion ($3.14 billion) Russian loan that it clinched last year. But that money is expected to run out by the end of the year.
Cyprus needs at least €2.8 billion ($3.5 billion) to support its banks, which have suffered huge losses from the write-down on their Greek government bond holdings and their large loan portfolio in the debt-crushed country.
Many Cypriots worry that the European bailout request will lead to the same painful salary cuts and tax hikes that other bailed-out countries, such as Greece, have had to endure.
The European Commission says Cypriot authorities must take action in several areas, including reforming the pension system and a bloated public sector that swallows about a third of all government spending.
Christofias said that he confronted other EU leaders by asking them point blank if, faced with similar financial problems as Cyprus, they would refuse a loan — such as Russia's — that comes with no strings attached.
"I say that entering the European Union's support mechanism, you may get even stricter terms than a loan from Russia," said Christofias. "The Russia of today is not the Soviet Union of the past."
But the Cypriot president stressed Cyprus would not refuse the European bailout loan if it clinches a Russian loan.