Russia declines help to Cyprus in hour of need

NICOSIA (AFP) – Russia Friday spurned investment proposals that would have helped rescue the Cyprus economy, piling pressure on Nicosia as it races to stave off financial meltdown and possible exit from the eurozone.

The European Union has given Nicosia until Monday to raise 5.8 billion euros ($7.47 billion) to unlock loans worth 10 billion euros or face being choked from European Central Bank emergency funding in a move that would bankrupt the island.

EU sources have said the bloc is ready to eject Cyprus from the eurozone to prevent contagion of other debt-hit members such as Greece, Spain and Italy.

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MPs were to meet in emergency session Friday to race through a raft of bills aimed at raising the funds and heading down a growing sense of anger and panic among Cypriots fearful that their life savings will disappear in the rubble of a banking collapse.

Local media said the start of the session, due at 0800 GMT, was delayed as the bills went back to parliament’s finance committee for further examination.

One bill gives effect to a key plank of the rescue plan — the so-called Plan B — setting up an investment fund and the nationalisation of pension funds, with bonds issued against future natural gas revenues.

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A second bill imposes “temporary restrictive measures on the movement of capital”.

Government hopes of an economic lifeline from Russia proved to be illusory and Cypriot Finance Minister Michalis Sarris left Moscow on Friday after two days of talks without reaching an agreement.

Russian officials said two major state-owned energy firms had turned down deals put forward by Sarris and that Russia refused a loan request to fill a 5.8-billion-euro shortfall left by the EU-IMF bailout offer.

“Our investors examined this issue and showed no interest,” Russian news agencies quoted the country’s Finance Minister Anton Siluanov as saying.

He added that Moscow never reviewed the issue of providing a new loan fearing Cyprus, already on the brink of bankruptcy, could not withstand more debt.

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Moscow has been angered by the original terms of a rescue plan for Cyprus proposed by the troika of international lenders that would have slapped a levy of up to 9.9 percent on bank deposits.

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