Cypriot officials: Plan B created to get bailout
NICOSIA, Cyprus — Searching for a way out of a crippling financial crisis, officials in Cyprus on Wednesday pursued a new bailout strategy that could include a loan from Russia in exchange for natural gas leases and selling off assets from its most troubled banks.
Cyprus needs to come up with 5.8 billion euros ($7.5 billion) on its own in order to secure 10 billion euros in rescue loans from international creditors. But the country’s first plan to seize up to 10 percent of people’s bank accounts failed miserably. Now officials are trying to limit the amount of money they need to take from customer’s deposits.
The new Plan B could be voted on as early as today, government officials said.
The latest move came a day after lawmakers voted overwhelmingly against the earlier plan — a rejection that threw Cyprus’ entire bailout into question. That raised the possibility the country’s banks could collapse, the government would default on its bills and Cyprus could be forced out of the euro.
That could roil global financial markets as well as endanger deposits in the country even further.
Plan B was described by three top government officials, who spoke on condition of anonymity because details of the proposal were not being released until party officials had a chance to review them at a meeting Thursday morning.
The package includes a proposal to restructure Cyprus’ heavily indebted second-largest lender, Laiki. The idea would be to isolate the bank’s bad assets, which would be taken over by the government, from its good assets, which could be sold off to raise money. That strategy could also be applied to the country’s biggest lender, Bank of Cyprus.
To avoid bank runs and give officials time to push the package through, the country’s banks, which have been shuttered since Saturday, will remain closed for the rest of the week, said the central bank spokeswoman, Aliki Stylianou. Monday is a bank holiday, so banks will not reopen before Tuesday.
Cyprus has turned to long-time ally Russia for help, and Finance Minister Michalis Sarris was in Moscow on Wednesday to discuss a range of aid options and vowed to remain there until he secured a pledge of support. “We will be here until some kind of agreement is reached,” Sarris said.
Nearly a third of the total amount of deposits in Cyprus’ banks is believed to be held by Russians. The idea that authorities could dip directly into people’s bank accounts had outraged Cypriots and Russians alike.
A Cypriot government official said the new proposal still includes some tax on deposits, but at a percentage far lower than those originally proposed. The official said the EU had given Cyprus until Monday to come up with an alternative, so speed was of the essence.
The European Union, Germany in particular, has long argued that members should not have to ask taxpayers to bail out a country when it was Russian oligarchs who would benefit.
While the economy of Cyprus is tiny — a mere .2 percent of the eurozone — its exit from the shared currency could raise speculation that other, larger countries could leave, roiling global financial markets.