Brussels, 21/03/2013 (Agence Europe) - On Thursday 21 March, the eurozone decided to have talks by videoconference that very evening with Cyprus, tweeted the chair of the Eurogroup, Jeroen Dijsselbloem. The European Central Bank drew up a clear timeline on Thursday morning, saying it will be providing Emergency Liquidity Assistance (ELA) to Cypriot banks until Monday 25 March, beyond which date “ILA could only be considered if an EU-IMF programme is in place that would ensure the solvency of the banks concerned”.
The news of the video conference follows a decision by the Cypriot government to drop the idea of a tax on savings, rejected on Tuesday by the Cypriot parliament, and to instead set up a “solidarity investment fund” to raise the €5.8 billion of cash it needs to drum up within the country if it is to receive aid from the eurozone and IMF totalling €10 billion. Draft legislation to this effect will be submitted to the cabinet at 6.00pm. The fund would be financed by pension funds, privatisations and the issuing of bonds for gas, explains a Cypriot source.
On Thursday morning, Dijsselbloem had a baptism of fire at the European Parliament, where he said that the tax on savings would nevertheless be unavoidable because Cyprus has to provide its own contribution to make up the total aid package needed (€17 billion). Dijsselbloem said that the eurozone would not lend any more than €10 billion to avoid endangering the sustainability of the Cypriot debt. He said the eurozone was prepared to do all it takes to help Cyprus, but not to lend any more than €10 billion because it would not be able to repay it. A loan from Russia does not seem to be on the cards at the moment either.
The sword of Damocles hanging over Cyprus is the idea of being forced out of the eurozone if there is no agreement by Tuesday, says a European source. Without cash, Nicosia would be forced to print its own money and this eventuality seems to have been mentioned by the Eurogroup's Euro Working Group during a video conference on Wednesday evening - which Cyprus did not attend. The above-mentioned Cypriot source says that leaving the euro is out of the question. AFP says that in addition to a credible Plan B, Cyprus is expected to prevent people taking money out of its banks to avoid a run on the banks, and it has already planned a merger of the country's two biggest struggling banks. Two European sources sais that the Thursday evening videoconference of eurozone finance ministers would not necessarily be decisive because this type of decision tends to take place when people meet up in person, said one, while the other raised the problem of being able to follow the talks online if they drag on.
Mea Culpa. Dijsselbloem said he took full responsibility for the idea of a tax on savings, and regretted the confused manner in which the news had been announced and the fact he didn't issue any further statements about the tax - which is seen as an attack on the EU's €100,000 savings guarantee. He said it looked more like a wealth tax and said it seemed fair to him to ask non-resident big savers to pay up because most Cypriots are undergoing austerity. He pointed out that a huge amount of cash in Cypriot banks comes from investors, not savers. (EL/transl.fl)