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Cyprus government proposes setting up investment fund to secure bailout

FXstreet.com (Barcelona) - After long talks the government in Nicosia has decided to create an “Investment Solidarity Fund" on Thursday afternoon in order to be able to strike a deal on the rescue program with the Eurozone and the IMF before the ECB withdraws liquidity to the Cypriot banking sector on Monday. The investment fund would be backed by various state assets such as church property or revenues from the country's natural gas reserves.

According to the government spokesman Christos Stylianides: “For this purpose draft, legislation is being prepared by the Law Office of the Republic, which will be presented before the Council of Ministers in a meeting today at 6pm.”

Asking Russia for assistance is also being considered. Cypriot finance minister Michalis Sarris flew to Moscow yesterday to discuss this possibility and is due to hold a meeting with two Russian ministers in the evening. His aim is to convince the Russian government to invest in the solidarity fund.

“Cyprus does not need another loan from Russia. What it needs is Russian investment,” he said. “We are asking for help clearly, but something that would make also economic sense for Russia.”

Nevertheless, the levy on private deposits hasn’t been completely rejected, according to an unnamed Cypriot government official. Russian president Dmitry Medevdev said on Thursday that he hoped the tax would not be necessary.

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