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Russia lambasts 'absurd' Cyprus bailout plans

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(Globalpost/GlobalPost)

Russian Prime Minister Dmitry Medvedev on Thursday slammed current European proposals to solve the Cyprus crisis as absurd, while Cypriot Finance Minister Michalis Sarris was set to hold further talks in Moscow over aid.

At the opening of a conference in Moscow with the head of the European Commission, Jose Manuel Barroso, Medvedev slammed the European strategy to bail out the near-bankrupt eurozone member.

"This scheme that is being discussed on Cyprus now looks absolutely absurd," Medvedev said.

"I think that in any case the Eurogroup could examine a future plan of regulating Cyprus with the participation of all the interested sides, including Russian structures."

His comments came as Russian finance minister Anton Siluanov was planning to hold further talks with Sarris on Thursday after a round of negotiations in Moscow the day earlier failed to make progress.

In an interview published early Thursday on the Russian government website, Medvedev compared the actions of the European Union, the European Commission and the Cypriot government to regulate the debt problem to "a bull in a china shop."

Earlier this week Cypriot lawmakers rejected a highly unpopular measure that would have slapped a one-time fee of up to 9.9 percent on bank deposits of over 20,000 euros as a condition for an EU-led 10-billion-euro bailout plan.

On Thursday, Cypriot leaders were to discuss a new plan aimed at securing the bailout.

In the interview to European media, Medvedev threatened that Russia could pull out of a double taxation treaty with Cyprus.

"We have an agreement on avoiding double taxation with Cyprus but I do not know whether we need such an agreement in this case, the question may be raised of severing this treaty, of denouncing it."

Russians including wealthy tycoons hold between a third and half of all Cypriot deposits and are believed to have more than $30 billion in private and corporate cash in the island's banks.

Medvedev also said Russia would consider reducing its euro reserves.

"We have 41 or 42 percent of our reserves denominated in euros -- that is a lot of money, but for us, as for any country, predictability is important, and the offer that was made is not just unpredictable, it is evidence of some lack of rationality."

The crisis in Cyprus has led to the blocking of the bank accounts of Russian government agencies, he complained.

"A large number of our open public structures work through Cyprus. They now have money blocked for reasons that are unclear, because the source of that money is obvious. This money is declared everywhere. These include government structures," Medvedev said.

"That's why we have to take quite a firm position on the events around Cyprus and regulating the debt of Cyprus," he said.

Sarris on Wednesday held meetings with his Russian counterpart Siluanov and First Deputy Prime Minister Igor Shuvalov but those talks failed to produce tangible results as Russia appeared to seek lucrative assets in exchange for more help.

Sarris has vowed to stay in Moscow until some agreement is reached that could help his country's banks avoid bankruptcy and the island from going into default.

The Cypriot finance minister also hopes to ease the terms of a 2.5-billion-euro ($3.2-billion) loan that Moscow afforded Nicosia in 2011 and which matures in 2016.

Medvedev in the interview said Cyprus was offering Russia a number of assets but did not provide details.

Officials familiar with Wednesday's talks were cited by Vedomosti business daily as saying there were no concrete results and that Cyprus did not make any offers to Russia that were immediately attractive, although Russia was analysing them.

"They had nothing that could be discussed substantively," a source familiar with the talks told Kommersant business daily.

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http://www.globalpost.com/dispatch/news/afp/130321/russia-lambasts-absurd-cyprus-bailout-plans