Cyprus needs support from the euro area, the International Monetary Fund and Russia to stay in the euro and avoid restoking the financial crisis, said Institute of International Finance Managing Director Charles Dallara.
“One lesson we’ve learned from Greece is that just because it’s a relatively small economy, don’t underestimate potential contagion if a situation is not managed carefully,” Dallara said in an interview today with Bloomberg Television’s “Countdown” on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland.
Cyprus has been negotiating a rescue since June. Dallara said delays carry risk for Cyprus and also for Italy and Spain because they could be affected by contagion.
“Russia has strong ties into Cyprus and they need to be part of the solution,” Dallara said. “There’s no doubt that this takes a coming together, a meeting of the minds and maybe a meeting of the check books of the euro zone, of Russia, of the IMF and the Cypriot authorities.”