Moscow, December 2011 - Cypriot and Russian government officials have signed a deal for a €2.5 billion loan to be extended to the island, with the first installment to be paid before the end of 2011.

The loan agreement was signed in Moscow on December 23 between the Moscow Russian Deputy Finance Minister, Sergey Storchak and Cypriot Finance Minister, Kikis Kazamias.

Disbursement of the first tranche of the loan, which comes up to €590 million, will be made by Dec. 31, while two more loan installments, of €590 million and €1.32 billion, will be made by the end of March. The loan is repayable in 4.5 years and bears an interest rate of 4.5%.

Government officials in Cyprus interpreted the deal as a show of Russia’s confidence in Cyprus and its economic prospects.

“The climate was particularly friendly at our meeting with our Russian colleagues, and I believe this agreement will assist Cyprus to face some of the consequences of the European and global financial crisis,” said Kazamias.

“The most important significance for me and the Cyprus economy is the trust and confidence shown by a large, friendly country, which, through this loan, confirms the level of trust shown in the Cyprus economy. This is very important from a psychological perspective in terms of the message this sends,” he added.

The Greek Cypriot press hailed the loan as a “Russian gift,” “Christmas gift” and “Happy Christmas from Moscow” in headlines.

Kikis Kazamias                       Sergey Storchak