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South Cyprus bailout: no haircut thanks

8 March 2013

Meetings continued yesterday between the proposed international lenders (Troika) and the President of South Cyprus Anastasiades and his team.

South Cyprus is strongly resisting two major proposals by the Troika. They do not even want to discuss the prospect of Greek depositors taking a reduction in the value of their deposits with the local banks (haircut). Even the rumours of this possibility have caused some locals to withdraw their deposits; resulting in around 1.7 billion Euros gone from the banks in January.

The second proposal was an increase in corporate taxes, which again is being strongly resisted.

These two issues are apparently the red line on which Anastasiades will not budge. However, there are a number of other problems before the proposed Euro 17 billion bailout can be implemented.

One issue is the question of money laundering. There there is a wide perception in Europe, particularly in Germany, that South Cyprus has become a haven for Russian money laundering. The Greek government has reluctantly agreed to an independent review of this.

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