Cyprus crisis: Pressure grows over bailout

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

The European Union, Germany and leading bankers have all urged the Cypriot parliament to quickly find a way of raising the 5.8bn euros needed to qualify for an international bailout.

German Chancellor Angela Merkel warned Cyprus not to "exhaust the patience of its eurozone partners", reports say.

The head of one of Cyprus' biggest banks urged MPs to accept a levy on bank deposits.

This was rejected on Tuesday, sparking a fresh eurozone confidence crisis.

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.

A much-delayed emergency session of parliament is due to vote on a new package of measures to raise the 5.8bn euros (£4.9bn; $7.5bn) needed to qualify for the 10bn-euro bailout.

Averof Neophytou, deputy leader of the governing Democratic Rally party, said political leaders were nearing a compromise and a breakthrough was possible on Friday.

Government spokesman Christos Stylianides said the authorities were engaged in "hard negotiations with the troika", referring to the EU, the European Central Bank and the International Monetary Fund, the AFP news agency reports.

The BBC's Chris Morris in the Cypriot capital, Nicosia, says it is possible that the vote may be delayed once more but he says Cyprus is running out of time to rescue its economy.

Banks have been closed since Monday and many businesses are only taking payment in cash.

There were protests outside parliament on Friday.

Meanwhile, the EU has postponed next week's summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.

'Playing with fire'

The details of the latest proposals are not clear and our correspondent says the eurozone will want to examine the figures carefully.

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

Cypriot Finance Minister Michael Sarris has returned from Moscow, where he failed to garner Russian support for alternative funding methods.

He 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.

One suggestion was to use pension funds to rescue Cyprus' banking system - an idea condemned by Ms Merkel.

One of her allies in parliament, Volker Kauder, said this was "playing with fire".

He said it couldn't happen because it would hurt what he described as "the pensioners, the small people".

Correspondents say Germany is saying that Cyprus cannot expect any more help from Berlin, or Brussels, than what has already been offered.

The European Central Bank has given Cyprus until Monday to find a solution, or it says it will stop transferring money to the troubled Cypriot banks.

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

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Some help has been forthcoming, with the announcement that Greece's Piraeus Bank would take over the local units of Cypriot banks. This would safeguard all the deposits of Greek citizens in Cypriot banks.

Earlier, Mr Stylianides urged the country's MPs to "take the big decisions" to prevent a financial meltdown.

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

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

The plan overwhelmingly rejected on Tuesday said small savers would pay a 6.75% levy, while larger investors would pay 9.9%.

'Door open'

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.

Eurozone bailouts - graphic

If ordinary savers are exempt, then larger investors, many of them Russian, would have to pay an even higher rate, if a levy does remain part of the scheme.

The government fears this would prompt foreign investors to withdraw their money, destroying one of the island's biggest industries.

State TV said a 15% levy on bank deposits of more than 100,000 euros was being discussed, AFP says.

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.

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.

Earlier, 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 Mr 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.

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