By MENELAOS
HADJICOSTIS, Associated Press – 2 minutes ago
NICOSIA,
Cyprus (AP) — Cypriot authorities were putting the final touches to a plan they
hope will convince international lenders to provide the money the country needs
to avoid bankruptcy within days.
As well as
trying to forge an overall financing package, lawmakers were meeting to decide
the fate of the country's second largest lender Laiki which was hardest hit
from its exposure to bad Greek debt.
Uncertainty
over the position of Cyprus' European partners to the broad thrust of the
country's new proposals formed the backdrop to Friday's discussions. There are
also questions over whether Russia will be involved in any final package even
though a two-day meeting between the finance ministers of Russia and Cyprus
broke down with no agreement.
One
concrete proposal is the restructuring of Laiki, which it is estimated will
generate around 2 billion euros of the 5.8 billion euros ($7.5 billion) the
country needs to raise itself. If the new package is agreed by international
creditors, then Cyprus will be able to secure another 10 billion euros from the
eurozone and the International Monetary Fund.
A new
package is necessary after Cyprus' parliament rejected a plan earlier this week
to grab up to 10 percent of bank deposits.
The country
needs to have the plan in place by Monday as the European Central Bank has said
it will cut off emergency support to the banks. That could trigger their
collapse and leave the Cypriot economy reeling. Many in the markets think that
would mean the country would have to leave the euro with potentially damaging
repercussions across the 17-country eurozone.
Worried
Laiki employees gathered near parliament for a second day after the governor of
the country's central bank announced that authorities would look to safeguard
the bank's viable parts and isolate its toxic assets. The hope behind the plan
is to staunch any possible contagion effects to the country's other lenders.
"The
bank is finished, we'll lose our jobs and I'm worried about my kids,"
Laiki employee Nikos Tsiangos behind barricades and a cordon of police that
have blocked the way to Parliament. "They've brought us to the brink, the
Europeans wanted to destroy our economy and they've done it."
Apart from
the bank's restructuring, lawmakers were looking at a number of other bills
including one setting up an "Investment Solidarity Fund" and
restricting banking transactions in times of crisis.
Together,
they will make up at least part of the alternative plan Cyprus hopes will
secure it the bailout money.
A vote on
the bills was scheduled for Friday morning, but that appears to have been
pushed back as lawmakers continue discussions.
Europe also
appeared to turn up the pressure on Cyprus Friday. Luxembourg's finance
Minister Luc Frieden told Germany's Inforadio that Cyprus "certainly must
change a very great deal in its financial sector ..... I see among some euro
states little financial room for more concessions to Cyprus."
Meanwhile,
Cypriot efforts to clinch a contribution from Russia appear to have failed
after Russia's finance minister was quoted as saying talks had broken down. Russia
is a key player in Cyprus as Russian depositors have parked around 20 billion
euros into the country.
Anton
Siluanov, Russia's finance minister, said the Cypriots were seeking to get
Russian companies to invest in a state-owned firm managing revenues from the
island's newfound offshore gas deposits and give Russian companies a stake in
that company.
Russian
investors were not interested, he said. Cyprus also offered stakes in some of
its banks, but Russian banks were not interested in that either. Siluanov also
said they were not discussing the possibility of providing a new loan to Cyprus
as the EU has set a debt limit for Cyprus.
However,
there is still speculation that Russia may get involved in some way if the EU
and the IMF sign off on the new Cypriot proposals.
Geir
Moulson in Berlin and Nataliya Vasiliyeva in Moscow contributed.
Copyright ©
2013 The Associated Press. All rights reserved.
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