Cyprus to vote on new plan, Europe skeptical

By Menelaos Hadjicostis

Associated Press

Published: Friday, March 22 2013 9:26 a.m. MDT

Protesting employees of Laiki bank chant slogans outside the Cypriot parliament, Friday, March 22, 2013. Cypriot authorities were putting the final touches Friday to a plan they hope will convince international lenders to provide the money the country urgently needs to avoid bankruptcy within days. “The next few hours will determine the future of this country,” said government spokesman Christos Stylianides.

Petros Giannakouris, Associated Press

NICOSIA, Cyprus — Cypriot lawmakers are due to vote Friday on a raft of new measures they hope will qualify the country for a bailout package and avoid financial ruin next week. But officials in Brussels and Berlin gave no indication it would be enough.

Cyprus needs to find a way to raise the 5.8 billion euros to qualify for 10 billion euros in rescue loans from other eurozone countries and the International Monetary Fund.

The plan needs approval from eurozone and IMF and that remained elusive. Eurozone officials said they had not seen all the details and would have to discuss whatever final plan Cyprus presents.

"The next few hours will determine the future of this country," said government spokesman Christos Stylianides.

Cyprus has had to come up with the new plan after lawmakers rejected a scheme that would have seized up to 10 percent of people's bank deposits.

The country needs to have the plan in place by Monday, when the European Central Bank has said it will cut off emergency support to the banks. That could trigger their collapse and devastate the economy, potentially pushing the country to leave the 17-country euro currency union.

"We are trying very hard," Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters on the progress of talks. "We may have a result this day."

As part of the package being discussed Friday, lawmakers were considering restructuring the country's second largest lender, Laiki, which suffered big losses on Greek debt investments.

A large part of deposits in Laiki above the 100,000 euros ($129,000) that are insured could be confiscated. A banking official, who spoke only on condition of anonymity because the talks were ongoing, said seizures of 25-30 percent were being discussed.

Banking officials estimate the restructuring will account for 3.6 billion euros of the 5.8 billion euros ($7.5 billion) the country needs to raise.

Laiki bank's acting CEO, Takis Phidias, condemned the plan. "I'm certain that there will be chaos after these bills are approved."

Phidias said the initial plan to seize deposits across all Cypriot accounts "would have more evenly shared the burden and certainly, it would have safeguarded both large banks. I'd like to believe that there's still time to carry out this negotiation.

A government official, speaking only on condition of anonymity as negotiations were on-going, indicated that a tax on deposits in other banks was also still on the table.

The Bank of Cyprus, the country's largest lender, said it backed the idea of confiscating some percentage of all bank deposits over 100,000 euros because there were no immediate alternatives.

The bank warned Cypriots that "a potential collapse of the banking sector could lead to the total loss of all deposits above 100,000 euros and the immediate sale of all collateral accompanying non-performing loans."

Meanwhile, Cypriot efforts to clinch a contribution from Russia appeared to have failed for now. Russia is a key player in the crisis as Russian depositors have parked around 20 billion euros in the country.

"We will only be ready to discuss various ways of support for that state only after the EU nations and Cyprus work out a final settlement," Russian Prime Minister Dmitri Medvedev told a news conference.

Russia's finance minister, Anton Siluanov, said the Cypriots were seeking investment from Russian companies in a Cypriot state-owned firm that will manage revenue from the island's newfound offshore gas. The Russian investors, however, were not interested.

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