Cyprus agrees strategy to beat bankruptcy
Moves still need eurozone and IMF approval Agency in fresh threat to Britain’s credit rating
Saturday 23 March 2013 POLITICIANS in Cyprus have approved three key bills aiming to secure a broader bailout package and stave off imminent bankruptcy.
The bills, passed last night, include a key one on restructuring banks, a second on restricting financial transactions in times of crisis, and one setting up a “solidarity fund”.
More bills to meet the total target of €5.8 billion (£4.9bn) which Cyprus needs to raise to secure an international bailout will be brought to a vote over the weekend.
They include one that imposes a tax of less than 1 per cent on all bank deposits, said deputy head of the governing DISY party.
The “solidarity fund” is intended to allow the pooling of state assets for an emergency bond issue, it was reported last night. These include future gas revenues and some pension funds – an idea that German Chancellor Angela Merkel has strongly condemned.
Under the bank restructuring, Cyprus’ troubled lenders will be split into “good” and “bad” banks. The steps are part of a package of measures to satisfy international lenders as the island races to clinch a €10bn (£8.5bn) bailout from the EU and avert bankruptcy.
But the plan needs approval from the eurozone and IMF, and that remained elusive with officials in Brussels and Berlin giving no indication it would be enough.
Eurozone officials said they had not seen all the details and would have to discuss whatever final plan Cyprus presented.
“The next few hours will determine the future of this country,” said a government spokesman.
Cyprus had to come up with the new plan after politicians re- jected a scheme that would have seized up to 10 per cent of deposits from all individual accounts held by the island’s banks.
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 Cyprus to leave the 17-country currency union.
“We are trying very hard,” Averof Neophytou, deputy leader of the ruling Democratic Rally party, said of the talks’ progress. “We may have a result this day.”
As part of the package, politicians were considering restructuring the country’s secondlargest lender, Laiki, which had big losses on Greek debt investments.
A large part of deposits in Laiki above €100,000 (£850,000) could be confiscated.
jaMeS THE UK’s credit rating suffered a fresh blow last night after a major agency placed it on watch for a downgrade.
Fitch warned Britain faced a negative outlook days after Chancellor George Osborne unveiled dire growth and borrowing figures in his Budget.
Another of the big ratings agencies, Moody’s, became the first to strip Britain of its goldplated AAA assessment last month.
Fitch has placed the UK on “rating watch negative”, indicating there is a “heightened probability of a downgrade in the near term”. It expects to complete a full review of the sovereign-