Cyprus scrambles to head off meltdown

EU threatens cutoff without R5.8bn

CYPRIOT politicians searched desperately yesterday for a Plan B to find billions needed to clinch an EU bailout and avert a financial meltdown after parliament rejected a bank deposit levy.

President Nicos Anastasiades, a month in office and facing his country’s worst crisis since a 1974 Turkish invasion, met party leaders to work out how to raise billion (R70-billion) demanded by the EU under a billion (R120.7-billion) rescue.

Cyprus has faced the prospect of bankruptcy since Tuesday, when its tiny parliament voted unanimously against a levy on bank deposits to raise the cash.

Officials said new options discussed yesterday could include nationalising pension funds of parastatals, issuing an emergency bond linked to future natural gas revenue or a revised bank deposit levy hitting only large investors.

Cyprus was also looking to Russia, whose citizens have billions of euros to lose in the island’s outsized and now-teetering banking sector.

In Moscow since Tuesday, Cypriot Finance Minister Michael Sarris said the two countries were discussing cooperation in the banking and energy sectors in addition to a new loan of billion (R60.4-billion).

The EU believes at least some of the amount they demand should come from the billion (R820-billion) in Cypriot banks, billion (R460-billion) of which is in the form of big deposits of more than 000 (R1.2-million), mainly from foreigners.

Hitting small depositors causes visceral outrage, but the government believes hitting large depositors too hard would destroy the offshore financial industry that forms much of the country’s economy.

Banks, shut since the weekend, will stay closed till Tuesday and the Cypriot stock exchange has suspended trade.

Cypriots still have access to cash for now as ATMs, emptied at the weekend, have been restocked. — Reuters