Putin:Cypriot bailout undermines confidence in the financial system

The Cypriot bailout undermines confidence in the financial system, Russian President Vladimir Putin has said.

On April l2 the Euro area Finance Ministers, collectively called the Eurogroup, gave the green light to a €10 billion bailout for Cyprus. The Cypriot package includes losses for uninsured deposits (above €100,000) in Bank of Cyprus, which will absorb the good part of Cyprus` second largest lender, Cyprus Popular Bank, which will be wound down which entails that uninsured depositors in the bank may take losses up to 80%. This is the first time Eurgroup decides on a bailout with the participation of depositors.

“We see the solutions being used to resolve the debt problems in particular countries, Cyprus, for example, where the chosen measures are essentially undermining confidence in the financial system,” Putin said during a meeting on measures for ensuring the Russian economy’s stable growth.

He added that “the experts cannot say for certain how these kinds of extraordinary measures will affect further developments in Europe and what long-term consequences they might produce.”

Many Russian businesses use Cyprus as their base. On December 2011 Russia concluded with Cyprus a €2.5 bilateral billion with an interest rate of 4.5% which matures in 2016. As part of the Cypriot bailout, Nicosia has already requested the extension of the loan`s maturity to 2022 and the reduction of the interest rate.