Cyprus faces the choice of asking for a bailout from its European partners in the euro or from Russia, and will decide where to turn after this weekend’s crucial elections in Greece, officials say. Government spokesman Stefanos Stefanou wouldn’t name the country where a possible loan could come from. But an official, speaking on condition of anonymity because of the sensitivity of the matter, identified it as Russia. Mr Stefanou said Cyprus is looking at both options in order to have “flexibility to deal with the issue”. “We have these options in front of us, we’re looking in the direction of a bilateral loan as well as toward the European Union support mechanism,” he told AP.
Cyprus Popular Bank, the island’s second-largest lender and the most exposed to Greek debt, needs €1.8 billion ($A2.28 billion) to boost its capital levels to an EU target by the end of the month. The government has vowed to put up the money if the bank, as expected, can’t raise it on its own. But its money that the small country of less than a million people doesn’t have. Unable to borrow from international markets with its credit rating reduced to junk status, Cyprus is depending on a €2.5 billion low-interest loan from Russia to see it through to the end of the year. Moreover, prospects look bleak for the island’s economy, which is projected to shrink by one percent of GDP this year before rebounding slightly in 2013.