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Cyprus Denies Claim It's Russian Dirty Money Haven

Finance Minister Vassos Shiarly said the government has nearly met a troika demand to cut spending and raise revenue by ⿬975 million over the next three years and that only a few issues remain to be ironed out. They include privatizing profitable, state-owned companies and supervision over the country's co-operative banks.

The main point of contention between Cypriot and troika officials is how much Cypriot banks need to recover from ⿬4.5 billion in losses they took on Greek government debt and bad loans.

Parliamentary Speaker Yianniakis Omirou said that the troika estimates the needs of the Cypriot banking sector ⿿ which holds assets eight times the size of the country's economy ⿿ to hover at around ⿬12 billion ($15.57 billion), twice as much as Cypriot officials believe. That's on top of the approximately ⿬4.5 billion the country needs to service its debt and pay its bills until 2016.

Cyprus has been unable to borrow from international markets for more than a year. A Cypriot request for a ⿬5 billion ($6.39 billion) loan from Russia ⿿ twice the amount Moscow gave Cyprus as a rescue loan last year ⿿ has so far gone unanswered.

The exact sum Cypriot banks will need won't be known before early next year when investment firm PIMCO and auditors Deloitte finish combing through the lenders' books. Shiarly said not having an exact figure won't keep the government from getting a bailout deal swiftly.

Although Shiarly said the government has enough cash on hand to pay public sector salaries for the next couple of months, state coffers are drying up fast. Moreover, prolonging the uncertainty over a bailout deal will tighten the noose around ailing domestic businesses and further drain confidence in the economy. That would be bad news for a country where unemployment has ballooned to 13 percent and the economy is projected to contract by some two percent this year.


Juergen Baetz in Berlin contributed to this story.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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