BRUSSELS Jan 16 Cyprus needs to open its books
to euro zone countries and quell speculation that its banks may
have been a conduit for money-laundering before it can receive
aid, Finnish Prime Minister Jyrki Katainen said on Wednesday.
"I think everybody needs the full truth on whether it is
true that there has been money laundering in Cyprus or not," he
said in an interview in Brussels.
"It is (self-evident) that all the countries in the euro
area, or all the countries who participate in a probable
package, need to know how the banks are behaving and that
everything goes like it is meant."
Cyprus applied for financial aid last June after its banks
suffered huge losses following an EU-approved writedown of Greek
debt, but some euro zone states like Germany are uneasy about
bailing out a country they say has murky financial
Cyprus says it has been extensively audited and there are no
indications its banking system has been used for
money-laundering. It says it complies with international rules
and that its low corporate tax rate and a tax treaty with Moscow
give it a competitive edge.
Russia has close historical ties with Cyprus and many Russia
businessmen either live or operate business from the island.
"We cannot afford for this kind of speculation -- we need
the truth. It is clear that this is one of the issues which must
be clarified," Katainen said.
Katainen added that Cyprus, which holds presidential
elections next month, needed new a government before
negotiations over bailout, whether with the EU, IMF or any other
countries, could start in earnest.
Asked if Russia, a major investor in Cyprus, could be
involved in a bailout, Katainen did not dismiss the idea.
"Why not? The IMF has been involved... shareholders of the
IMF, so why not individual countries? And Russia is one of the
Russian President Vladimir Putin said last year that his
country could provide support for Cyprus, but only after the
eurozone has defined the terms of its assistance package.
It is estimated that Cyprus needs 15-17 billion euros to
recapitalise its banks and put the economy back on a stable
footing. That amount is equal to the entire output of the
Cypriot economy, meaning any bailout may not be sustainable.
Under the rules governing the ESM, the euro zone's 500
billion euro assistance fund, a country's bailout must be
'sustainable' before aid can be disbursed, which leaves a
question mark hanging over how to help Cyprus.