World

Cyprus asked to reach pact with Euro zone partners

PTI Brussels | Updated on March 12, 2018 Published on March 24, 2013

Convening of the emergency meeting by the finance ministers and participation by Cyprus President Nicos Anastasiades are seen as strong indications that an agreement is in the offing.

The European Union has warned debt-stricken Cyprus on the eve of crucial negotiations on its future that it will have to make “hard choices” and asked the country to reach an agreement with its Euro zone partners on a rescue package to avert a bankruptcy.

It is essential that an agreement is reached by the Euro zone finance ministers at their meeting in Brussels on Sunday evening on a €10-billion ($13 billion) financial rescue package offered by the EU and the International Monetary Fund over a week ago, EU Commissioner for Economic and Monetary Affairs Olli Rehn said.

“Unfortunately, the events of the past days have led to a situation where an optimal solution is no longer available,” Rehn said in a statement on Saturday night.

“Only hard choices are left today,” he said.

He made the statement as negotiators of the Cypriot Government and representatives of the “troika” comprising the EU Commission, the International Monetary Fund and the European Central Bank broke up their negotiations in Nicosia on ways to avert a financial meltdown and decided to continue their talks in Brussels.

Rehn said the negotiations made some progress and he hoped they can “pave the way for an agreement on a financial assistance programme’’.

Convening of the emergency meeting by the finance ministers and participation by Cyprus President Nicos Anastasiades are seen as strong indications that an agreement is in the offing.

In a dramatic U-turn, the country’s political leaders are again considering a controversial levy on bank depositors to raise €5.8 billion to secure the bailout, which was overwhelming rejected by Parliament on Tuesday.

The turnaround came after Russia, whose citizens have billions of euros of deposits in Cypriot banks, early last week turned down a request for help from the government.

Media reports said discussions are focusing on a plan to impose a one-off levy between 15 and 20 per cent on deposits above €100,000 in the country’s largest bank, the Cyprus Bank, where wealthy Russians have reportedly parked billions of euros and four per cent over the same level in all other banks.

The original plan was to charge a one-time 6.75 per cent levy on deposits between €20,000 and €100,000 and 9.9 per cent above that level.

A major part of the bailout package offered by the EU and the IMF is intended to recapitalise the largest banks, whose collapse could force the country out of the euro zone.

The island’s banking sector was crippled by its exposure to Greek debts and loss of payments from Greek businesses. The ECB last week threatened to cut off its emergency assistance for Cypriot banks if no viable plan to raise €5.8 billion is presented by Monday.

Published on March 24, 2013

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