Despite tension that flared when Cyprus said it would confiscate up to 80 percent of the deposits in state banks over 100,000 euros ($130,000) which particularly hit Russian investors, Russia has agreed to to allow two more years for repayment on a 2.5 billion euros ($3.26 billion) loan and lower the interest rate from 4.5 to 2.5 percent.
Russia provided the loan to Cyprus in 2011 as it was growing apparent that the country’s banks were getting into deep trouble because of their large holdings in Greek bonds that were devalued 74 percent and because of bad loans to Greek businesses that went under in that country’s crisis.
Russia and Cyprus had been at odds because of the bank account confiscation scheme that is hitting big Russian depositors hard. Cyprus tried to negotiate another loan with Russia but that didn’t come through at the same time it was talking to international lenders.
Cyprus is still awaiting an agreed-upon 10 billion euros ($13 billion) loan from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and in return is cutting spending and seizing money from bank accounts to save another 13 billion euros ($17 billion).
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