Cyprus: Ukraine crisis won't harm economy

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Cyprus' Finance Minister Harris Georgiades, left, and Eurogroup President Jeroen Dijsselbloem speaks to the media during a press conference at the Ministry of Finance in Nicosia, Cyprus, Monday, March 31, 2014. Cyprus has received a 10 billion euro bailout from the European Commission, the European Central Bank and the IMF, known as the Troika and has been subjected to three evaluations so far from its international lenders. (AP Photo/Philippos Christou)

NICOSIA, Cyprus (AP) — The Cypriot government said Monday that the crisis in Ukraine isn't likely to harm the bailed-out country's economy, which counts on tourism and business from Russia and the Ukraine for growth.

Cyprus has long been a popular place for Russians and Ukrainians to hold bank deposits and open companies thanks to an advantageous tax regime. But as Europe and the U.S. slap sanctions on Russia and Ukraine's economy is in freefall after Moscow annexation of the Crimean Peninsula, some fear a knock-on effect on Cyprus.

The island's economy is projected to shrink by 4.8 percent this year before bouncing back in 2015.

"We are not particularly concerned that the Cypriot economy will be negatively impacted by the developments," Harris Georgiades said of the Ukrainian crisis after talks with his Dutch counterpart Jeroen Dijsselbloem, who also chairs the meetings of the eurozone's 18 finance ministers.

Cyprus received a 10 billion-euro ($13.76 billion) rescue package from other eurozone countries and the International Monetary Fund amid a banking crisis a year ago.

The deal crushed Cyprus' banking sector because a key condition of the rescue involved seizure of nearly half of deposits over 100,000 euros in the country's largest bank and closure of its second-largest lender. Depositors in the Bank of Cyprus, the largest lender, were given shares in exchange for their seized money.

To prevent a run amid ebbing trust in banks, authorities imposed controls on money flows that have been relaxed considerably since. However, limits on unfettered transfers abroad remain in place and authorities hope to lift them by the end of the year.

Dijsselbloem said he's optimistic that Cyprus "will recover within a short period of time" because the government is implementing the terms of its rescue agreement.

"I think the trust will come back, simply because all the measures are being put in place," he said.