The Cypriot government gets a €60 Million loan from a Russian bank to cover costs for the remainder of 2011, Live

With many countries in the EU suffering reduced output and a strain on the individual nations banking system, many investors and citizens are concerned that there may be something more than just poor economic data that is hidden under the bed.

With the Global financial markets built firmly on optimism, it is no wonder that you never hear of anything negative until the volcano has already started to rain down its dust.

So why would Cyprus be borrowing €60 Million from a Russian bank?

Is this a sign that something is wrong with the Governments accounts or the countries banking system?

Or is something a little less dramatic unfolding?

Well lets pick the loan apart, firstly it is hardly a huge loan for a country the size of Cyprus. It was sought to make sure that the Cyprus government could finance itself for the rest of 2011.

Cyprus government needs to get tough on what is owed and not follow Greece’s example:

When we last reported that the Peyia municipality in Paphos was looking to turn off services to people and companies if they did not pay their bills, it became apparent that cash flow was starting to hit at the local level in Cyprus after all.

If Peyia can be owed some €2 Million in lost revenue from services and bills imagine what other areas of Cyprus could be owed, and if this is the case as I suspect, we can see why cash flow has potentially become an issue of recent.

With tourism revenue in Cyprus up 50% this April the dent in the government coffers from last years reduced taxes surely means a loan of some sort was inevitable?

Cyprus government safe?

With Cyprus needing a total of €150 million to get through 2011 as planned, Russian investment has obviously seemed like a better choice than going to the EU knowing what kind of reverberations that would send through the European and International markets.

No country would want that just now, especially when it appears Cyprus is far from in danger short term or indeed long term.

Cyprus will need €2.4 Billion Euros next year, of which €1.7 Billion is debt that will need refinancing.