Last Friday, the sun was shining in this paradise for Russians. The sky was a deep blue and the palms along the beach promenade swayed in a light breeze as the temperature climbed to 29 degrees Celsius before noon. No doubt Limassol offered a welcome relief from the cold and wet autumn weather of Moscow. Russians appreciate this spot on the southern coast of Cyprus.

The city park has a bust of Russian poet Alexander Pushkin, there's a Russian radio station, Russian newspapers, a Russian Orthodox church, private schools offering Russian diplomas and signposts in Cyrillic writing. The mayor of Limassol himself speaks fluent Russian and studied in Moscow during the Soviet era.

There's something that is probably a cause for concern for the Russians of Limassol, though. They are at risk of losing their paradise because Cyprus is virtually bankrupt. The island's economy has been dragged down by the recession ravaging Greece, with which it has close business ties. In addition, Cypriot banks bought billions of euros in Greek government bonds that are practically worthless now. The banks have already had to write off large portions of their investments, and are in trouble as a result.

This prompted the government of President Dimitris Christofias to make a pre-emptive application for EU aid in the summer. Russia had already provided a loan of €2.5 billion. That money has been used up and Russian President Vladimir Putin is reluctant to provide a further €5 billion.

Now the euro countries, and especially Germany, will have to step in with a €10 billion aid injection to prop up the island's banks. That will confront German Chancellor Angela Merkel, Finance Minister Wolfgang Schäuble and their European colleagues with a major dilemma because a secret report written by the German foreign intelligence service, the Bundesnachrichtendienst (BND), outlines who would be the main beneficiaries of the billions of euros of European taxpayers' money: Russian oligarchs, businessmen and mafiosi who have invested their illegal money in Cyprus.

The Russians don't just love Cyprus for its great climate. The shell companies here are conveniently anonymous, the banks discreet and the taxes are low. Dirty money bestowed a lasting boom on Cyprus and the inhabitants of "Limmasolgrad" are still doing well.

The European aid will help the country stabilize its controversial core industry and keep it going for the next few years. In Brussels and in the EU capitals, the Cypriot financial sector doesn't enjoy an especially good reputation. Cyprus and its banks are widely seen as a tax haven and a money-laundering base.

Read the rest of this article at Spiegel Online International…

From Cyprus

A 10-billion euro endgame

"For the IMF, Cyprus' debt is not sustainable," says Cypriot daily Politis. Meanwhile, the "troika" of representatives from the International Monetary Fund (IMF), the European Commission and the European Central Bank is expected on the island on November 8. Their talks with the Cypriot government will centre on an offer of aid of about 10 billion euros in exchange for cuts in public spending and a hike in taxes. If the two sides reach an agreement, the aid could be confirmed as early as November 12, at the upcoming Eurogroup meeting of finance ministers from Eurozone countries. But Politis wonders —

For the government, Cyprus is being dragged down by its close ties to Greece and must conclude a bailout plan as quickly as possible. But will 10 billion euros be sufficient to make the debt sustainable?

In reaction to the Der Spiegel article, Politis says that a secret report by German Intelligence which claims that "European aid to Cyprus would mainly benefit Russian oligarchs and underworld figures who launder money on the Mediterranean island may be slanderous, but one thing is sure: the IMF is reluctant" to help Cyprus.