Cyprus has four days to agree on a new plan to raise funds to avoid bankruptcy, with the European Central Bank (ECB) warning yesterday it will pull the plug on the country’s banks at the start of next week if no solution is found.
Facing the ultimatum, the Cypriot government was racing to cement a new package that will please both parliament and the country’s potential international creditors.
Party leaders met with the Cypriot president to consider a range of measures that could raise the 5.8 billion euros (US$7.5 billion) needed to qualify for 10 billion euros in rescue loans from the eurozone partners and the IMF.
One measure agreed on yesterday was the creation of an “Investment Solidarity Fund” that would appeal for donations from ordinary Cypriots, businessmen and foreign investors, said Demetris Syllouris, head of a small right-wing party.
A “Plan B” was being hashed out after lawmakers soundly defeated an earlier proposal to seize up to 10 percent of all domestic deposits to raise the 5.8 billion euros.
The rest of the “Plan B” will include restructuring Cyprus’ troubled banks, some form of Russian help, dipping into pension funds and taking up an offer from Cyprus’ wealthy Orthodox Church to contribute. Some form of tax on bank deposits is also possible.
“We will have a program of support for Cyprus by Monday,” Central Bank of Cyprus Governor Panicos Demetriades said.
However, it seemed unlikely a deal would be reached in time for a vote during parliament’s regular session yestserday.
“Today, no, I don’t think so,” said Averof Neophytou, deputy head of the governing DISY party, when asked if a deal could be voted on by the evening.
Russia is likely to pitch in, Cypriot officials have said. Nearly one-third of the 68 billion euros in deposits in Cyprus’ banking sector are held by Russians.
Cypriot Minister of Finance Michalis Sarris has been in Moscow since Tuesday seeking to forge a deal.
Cyprus’ troubled banks have enough money until Monday, after which the ECB said it will switch off its lifeline on Monday unless an international rescue is in place.