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One of the main reasons given for the raid on deposits is that Cyprus’ banks, which are in deep trouble after taking huge losses on bad Greek debt, are eight times the size of the economy. The Cypriot government would be unable to pay back the amount of loans it would need to rescue the banks.
Another reason for the raid is that Russian money accounts for a large part of the banks’ deposits. An estimated (euro) 20 billion ($26.17 billion) of Russian money sits in Cypriot banks, part of it thought to be linked to money-laundering. European officials were loathe to give Cyprus bailout loans to protect those Russians’ savings.
German Chancellor Angela Merkel needs to win support for a Cypriot bailout in Parliament amid widespread skepticism in the country over whether Cypriot authorities have done enough to combat money laundering.
"It is good that the Cypriot government, the Cypriot parliament, are now taking more time to reach a better solution," Germany’s Vice Chancellor Philipp Roesler told reporters in Berlin. "But it is important to us that the overall volume is achieved all the same.
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