Russia's new ally – why Luxembourg is perfectly positioned to form a special relationship with Russia
The financial crisis in Europe has been a constant in the news for longer than many of us would care to remember. The near financial collapse of Cyprus, developed primarily as a result of its exposure to Greece, is the latest highly publicised example of a wholly unstable economy and a country in political disarray. Described by some members of the Cypriot parliament as the "enslavement deal", parliament in Cyprus has recently approved the country's international bailout after warnings that the alternative would indeed be financial collapse. MPs voted through the loan package by 29 votes to 27. The small eurozone state secured a loan package worth 10bn (£8.5bn) from its EU partners and the International Monetary Fund. In return it must raise 13bn (£11.1bn), largely through banking reform. This has created huge divisions in the country's representative house, where no one party has a majority. The link between Russia and Cyprus has existed for many years and is one of convenience for the Russian market. While the double taxation arrangements between the countries are the main reason for Russian business flowing through Cyprus, there are many softer issues that have sustained the relationship. Proximity, "ease of doing business" and the ability of a number of service providers to speak the language has certainly assisted relations.
Cyprus’ special relationship with Russia has been rocked by its exposure to the eurozone crisis – and Luxembourg is perfectly positioned to step into the breach, says Simon Dinning
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