Cyprus seeks new rescue plan
March 21, 2013, Thursday
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CYPRIOT officials rushed yesterday to find new ways to stave off financial ruin, including asking Russia for help, after Parliament rejected a plan to contribute to the nation's bailout package by seizing people's bank savings.
Tuesday's rejection of the plan to take a slice of all deposits above 20,000 euros (US$25,888) has left the country's bailout in question.
Without the bailout, the Cypriot banking sector would collapse, devastating the economy and potentially causing the country to leave the euro. That could roil global financial markets as well as endanger deposits in the country even further.
Political party leaders met at the central bank to discuss an alternative plan to raise the 5.8 billion euros the country needs to qualify for 10 billion euros in rescue loans from its fellow euro countries and the International Monetary Fund.
They also discussed not raising the full 5.8 billion domestically, with the rest potentially coming from other sources, such as Russia. Cyprus' finance minister was in Moscow to ask for support, possibly in the form of an extension on an existing loan.
"We will be here until some kind of agreement is reached," Michalis Sarris said in Moscow.
Cypriot President Nicos Anastasiades held talks with European and IMF officials but issued no statement on the result.
The eurozone and IMF officials must sign off on any Plan B the Cypriots come up with if it is to be approved as part of the bailout.
Cyprus is running on borrowed time, literally.
The European Central Bank is keeping the Cypriot banks alive by allowing them to draw on emergency support from the local central bank. But the ECB has said it would cut off that aid if there was no bailout deal soon and it became clear the banks had no hope of becoming solvent again.
Tuesday's rejection of the plan to take a slice of all deposits above 20,000 euros (US$25,888) has left the country's bailout in question.
Without the bailout, the Cypriot banking sector would collapse, devastating the economy and potentially causing the country to leave the euro. That could roil global financial markets as well as endanger deposits in the country even further.
Political party leaders met at the central bank to discuss an alternative plan to raise the 5.8 billion euros the country needs to qualify for 10 billion euros in rescue loans from its fellow euro countries and the International Monetary Fund.
They also discussed not raising the full 5.8 billion domestically, with the rest potentially coming from other sources, such as Russia. Cyprus' finance minister was in Moscow to ask for support, possibly in the form of an extension on an existing loan.
"We will be here until some kind of agreement is reached," Michalis Sarris said in Moscow.
Cypriot President Nicos Anastasiades held talks with European and IMF officials but issued no statement on the result.
The eurozone and IMF officials must sign off on any Plan B the Cypriots come up with if it is to be approved as part of the bailout.
Cyprus is running on borrowed time, literally.
The European Central Bank is keeping the Cypriot banks alive by allowing them to draw on emergency support from the local central bank. But the ECB has said it would cut off that aid if there was no bailout deal soon and it became clear the banks had no hope of becoming solvent again.
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