Cyprus races to agree details of 'plan B'

Banks could lose emergency funding within 72 hours, prompting exit from euro

Brussels, Nicosia

Cyprus has just 72 hours left to come up with a plan to raise €5.8bn before the European Central Bank pulls emergency funding from its ailing banks, plunging the country into economic turmoil and towards an exit from the single currency.

Politicians are frantically trying to scrape together a package to raise the money and get it approved by parliament. But they are playing a delicate balancing act, anxious to please the “troika” of the EU, ECB and International Monetary Fund (IMF), while not alienating their biggest investors in Russia.

Tonight, the government was mulling restructuring the ailing Cyprus Popular Bank - widely known as Laiki - prompting it to impose a €260 daily withdrawal limit and sending customers rushing to cash machines before they ran dry. Hundreds of the bank's employees protested outside parliament, worried that the restructuring might cost them their jobs.

“What am I to do now? I have three kids and many, many loans,” one bank employee, who gave her name as Evi, told The Independent.

Splitting Laiki in two and creating a “bad bank” to deal with unpaid debt was one of a number of proposals being discussed as parliament met tonight, with MPs also debating imposing capital controls to stop money flooding out of Cyprus when the banks reopen on Tuesday.

This morning the ECB said it would continue emergency funding for the worst-hit banks until Monday. Further assistance “could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks”.

The troika has offered €10bn to prop up the Cypriot economy after it was hit hard by the financial crisis in Greece, but this depends on Cyprus contributing another €5.8bn - funds EU officials are keen to see come from a tax on those with savings of more than €100,000.

Other elements of Nicosia's “Plan B” under discussion were a nationalisation of pensions, a possible contribution from Russia, and what Cypriot politicians are calling a “solidarity fund”, which investors, business people and others will be invited to contribute to. If it is not enough, Cyprus is set to become the first nation ousted from the eurozone.

“If the financial sector collapses, then they simply have to face a very significant devaluation and faced with that situation, they would have no other way but to start having their own currency,” a senior EU official told Reuters news agency.

Eurozone leaders are desperate to prevent the chaos in Cyprus spilling into other nations in the bloc. Jeroen Dijsselbloem, the head of the eurogroup of finance ministers, said that the crisis in Cyprus presented a “systemic” risk. After a conference call with fellow ministers last night, he urged Cyprus to put a new proposal on the table “as rapidly as possible”, after a plan devised in Brussels last weekend was struck down by parliament.

The Cypriot Central Bank governor insisted they would have a programme in place by Monday, and a parliament vote on the new proposals is expected today.

“The Cyprus economy is on the brink and in a fragile state. The next move may prove its salvation or destruction,”  the Bank of Cyprus - the nation's largest lender - said in a statement. “It is imperative we immediately proceed with the drawing up of an agreement with the eurogroup.”

Tonight Cypriot Finance Minister Michael Sarris was still involved in talks in Moscow in an attempt to raise funds towards the bailout deal. The ratings agency Standard & Poor's, meanwhile, downgraded the nation's credit rating.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Quality Inspector

£20000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Recruitment Genius: Female Buddy & Team Leader / Buddy

£11 per hour: Recruitment Genius: To join a team working with a female in her ...

Recruitment Genius: Configuration and Logistics Team Member

£16000 - £17000 per annum: Recruitment Genius: This company has over 30 years ...

Guru Careers: Creative Director / Head of Creative

£65K - £75K (DOE) + Benefits: Guru Careers: We are seeking a Creative Director...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence