Cyprus crisis: Coming hours 'to decide' fate

Cypriot reaction: "No-one knows what is going on"

The coming hours will decide Cyprus' fate as it struggles to meet the terms of an international financial bailout, a government spokesman has said.

"Any solution involves pain," Christos Stylianides said in the capital Nicosia, without giving details.

Parliament will debate plans to raise the 5.8bn euros (£4.9bn; $7.5bn) needed to qualify for the 10bn-euro bailout, having rejected an earlier deal.

Without it, the cash supply to the euro member's struggling banks may be cut.

Analysis

The eurozone is really turning the screw on Cyprus, and it's being led by Germany.

The message is crystal clear - your economic model has to change. They will no longer accept the idea of a national economy within the eurozone that is dependent on its reputation as an offshore tax haven.

There is huge irritation with the way the Cypriots have handled things, and that has led to the imposition of deadlines which mean big decisions need to be taken very quickly.

The cost of cleaning up the Cypriot banking system must be borne by investors in the Cypriot banking system - like it or lump it.

German Chancellor Angela Merkel has warned that Cyprus' eurozone partners are running out of patience with its efforts to secure the bailout.

Cypriot President Nicos Anastasiades held talks on Friday with representatives of the bailout "troika", which is made up of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF).

Leading Cypriot bankers have urged parliament to accept a levy on bank deposits, as originally proposed under the bailout, but with smaller depositors exempted.

Cypriot Finance Minister Michael Sarris said a levy "of some sorts" remains "on the table" despite widespread fury among both ordinary savers and large-scale foreign investors, many of them Russian.

In another development, Greek Finance Minister Yannis Stournaras announced that a Greek banking group had begun acquiring the Greek units of Cypriot banks. The measure would safeguard all the deposits of Greek citizens in Cypriot banks.

Appeal to MPs

Press review

"Cyprus running out of time: Whether the plan meets with the EU's approval is... doubtful." - Germany's Berliner Zeitung daily

"After a night of worry with a few tense moments, the Cyprus parliament is once more the focus of international attention." - Italian daily La Repubblica

"As for Cyprus being an offshore tax haven, didn't anyone realise this until last week? Aleksei Polukhin, Russia's Novaya Gazeta

"[Cyprus] should not count on Russia, because Russia has quite rationally decided that Cyprus is in a state of freefall and investing money in it now means losing it." - Foreign affairs analyst Fyodor Lukyanov, speaking on Russia's Ekho Moskvy radio

The package put before parliament was proposed after plans to raise the money through a one-off bank deposit levy of up to 9.9% caused a storm of protest.

The Cypriot government urged the country's MPs to "take the big decisions" to prevent a financial meltdown.

"We must all assume our share of the responsibility," Mr Stylianides said in a televised statement.

Bank of Cyprus chairman Andreas Artemis said: "It should be understood by everyone... especially from the 56 members of parliament... there should not be any further delay in the adoption of the eurogroup proposal to impose a levy on deposits more than 100,000 [euros] to save our banking system."

With no end in sight to the crisis, businesses in Cyprus have been insisting on payment in cash, rejecting card and cheque transactions.

"We have pressure from our suppliers who want only cash," Demos Strouthos, manager of a restaurant in central Nicosia, told AFP news agency.

Start Quote

This crisis has revealed yet again the faultline at the heart of the euro”

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The situation is pretty chaotic for Cyprus as its eurozone partners really turn the screws and Russia rejects giving any significant aid, the BBC's Chris Morris reports from Nicosia.

Our correspondent says he has never seen this much pressure being applied to a member state by the rest of the eurozone community in recent years.

Eurozone partners are saying Cyprus has got to change its banking system, over-reliant on foreign depositors, and the money it needs has to come out of that system, one way or another, he adds.

'Door open'
Eurozone bailouts - graphic

Talks in Moscow on possible new financial aid from Russia, a key investor in Cyprus, have failed.

Russia's Finance Minister, Anton Siluanov, speaking after talks with his Cypriot counterpart Michael Sarris, said Russian investors were not interested in Cyprus' offshore gas reserves.

Russia gave Cyprus an emergency loan of 2.5bn euros in 2011. Mr Siluanov said that no new Russian loan had been on the table with Mr Sarris because of limits imposed by the EU on Cypriot borrowing.

However, Russian Prime Minister Dmitry Medvedev later said Moscow had not "closed the door" on possible future assistance.

Cypriot leaders must first reach agreement with their fellow members of the EU, he added.

Cyprus should not "exhaust the patience of its eurozone partners", Mrs Merkel said at a meeting at the German parliament, participants told AFP news agency.

Evidently speaking before news of President Anastasiades' new talks in Nicosia, Mrs Merkel also complained that the Cypriot government had not been in contact for days with the troika.

Her Finance Minister, Wolfgang Schaeuble, has voiced scepticism about Cyprus' plans to raise billions of euros without the levy.

"Cosmetic touches alone" would not be enough, he said on Thursday.

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