Brussels, 22/03/2013 (Agence Europe) - Eurozone finance ministers may meet this weekend, or on Monday 25 March, to put the final touches to an aid package for Cyprus at the end of a tough week for the island. The eurozone held a video conference on Thursday evening where they said they were prepared to discuss an alternative plan and hoped Cyprus would come up with one as soon as possible. A European source said that no meeting was likely before Saturday evening, feeling that Eurogroup would probably meet up physically on Sunday evening before the markets re-open on Monday morning, or possibly on Monday evening before Cypriot banks re-open on Tuesday. In order to avoid a run on the banks, Euro Commissioner Olli Rehn called on Friday morning for rapid introduction of laws to restrict the amount of cash people can remove from their bank accounts. The ECB announced on Thursday that it would stop providing emergency cash to Cypriot banks (under the ELA scheme) if agreement was not reached by Tuesday. Berlin was showing signs of impatience on Friday. According to comments made by MPs in the German coalition government, the German chancellor, Angela Merkel, said in a meeting that people should not abuse the patience of eurozone partners. The eurozone has offered to provide aid of up to €10 billion, but refuses to lend any more, arguing that the country would not be able to pay it back.
Cyprus' Plan B. Cyprus must come up with €5.8 billion in addition to money expected to be netted by privatisation (some €1.4 billion). On Friday afternoon in Nicosia, people said that agreement on a Plan B was only hours away. One Cypriot source said that the troika (European Commission, European Central Bank and International Monetary Fund) had given the go-ahead to a combination of measures that the Cypriot parliament would be voting on Friday evening, and that the new package included resolution of Popular Bank (Laiki). Laiki would be split in two with bad debts hived off. Insured deposits, below the EU cap of €100,000 would go into a “good bank” and not sustain any losses, while uninsured deposits would go into a “bad bank” and be frozen until assets can be sold. Losses to unsecured creditors, including unsecured savings, could reach as high as 40%, and this move has the support of the IMF and ECB. The Cypriot source said that this would reduce the amount of cash to be found by Cyprus to some €3.6 billion. The combination of measures would include a raid on savings - the controversial measure that is so unpopular in Cyprus and has already been rejected by the Cypriot parliament. Only savings of above €100,000 would be taxed at around 10%. The introduction of an investment fund may go ahead, financed by pension funds and bonds on future gas sales, and the bank industry may be slimmed down so that it is smaller as a proportion of Cypriot GDP.
Help from Greece. Greece is planning to help Cyprus. On Friday, the Greek Finance Ministry said it would be buying the branches of Cypriot banks in Greece. Greek Prime Minister Antonis Samaras and Cypriot President Nicos Anastasiades held a telephone conversation the same day. The Greek idea would allow the branches of Cypriot banks to be recapitalised by Greek banks. AFP says Pyraeus Bank will buy the branches in Greece of Cyprus Bank and Popular Bank (Laiki). The same Cypriot source said this would raise a quarter of a billion euro.
Moscow will decide later. Russian Prime Minister Dimitri Medvedev said at a joint press conference in Moscow on Friday with European Commission President Jose Manuel Barroso that he “hadn't shut the doors, and didn't say that we didn't want to hear anything”, explaining that many Russian companies, both private and public, had bank accounts in Cyprus and Russia had lent Cyprus €2.5 billion in 2011, but it was for the eurozone to introduce an aid programme before any Russian aid could be forthcoming. “Only after a final settlement scheme is in place only in that case Russia will join this process due to obvious, legal and economic reasons.” He hoped a solution would be found quickly. On Thursday, Barroso said that he was aware of Russia's interests in this connection. Moscow was furious earlier this week because it had not been consulted ahead of a raid on savings being decided in the early hours of Saturday morning (see EUROPE 10808 and EUROPE 10809). Medvedev said on Thursday that the Saturday agreement was totally daft. Barroso said that there had been a lot of dialogue with Russia on Cyprus for a while now.
Moscow announced on Friday morning that it is not interested in investing in Cypriot banks or gas. Cypriot Finance Minister Michalis Sarris returned to Nicosia from Moscow empty-handed. The above Cypriot source said Russia was only prepared to consider extending the repayment deadline for its €2.5 billion loan without cutting the interest rate.
MEPs hoped that a European solution would be found. The president of the European Parliament, Martin Schulz, and the heads of the biggest political parties at the EP (Joseph Daul of the EPP, Hannes Swoboda of S&D, Guy Verhofstadt of ADLE, Rebecca Harms and Daniel Cohn-Bendit of the Greens/EFA and Martin Callanan of ECR) issued a joint statement: “Deposits of less than €100,000 should be exempted from any levy. A fairer and sustainable solution for the Cypriot people must be found. We regret the lack of transparency and democratic accountability in the original solution proposed by the Commission, IMF and the ECB for Cyprus. Yet the 'blame-game' on whose proposal this was only serves to undermine confidence in the EU”. (EL/transl.fl)