Cyprus bailout talks intensify

Cypriot authorities were last night locked in talks in Nicosia on formulating a fresh bailout proposal in a bid to stave off financial collapse.

Talks intensified last night after European authorities effectively vetoed an alternative proposal put forward by the Cypriot authorities on Thursday evening. The “Plan B”, upon which the Cypriot parliament had been due to vote yesterday, included a proposal to nationalise state pensions, and a radical restructuring of the banking sector which would see Cyprus’s second-largest bank, Laiki, split into a “good” and “bad” bank. But European authorities rejected the proposal, with Germany in particular outlining its resistance to the plan to nationalise state pensions.

“The next few hours will determine the future of this country,” government spokesman Christos Stylianides said yesterday as talk continued for a fifth day.

A source close to the negotiations told The Irish Times that a Bill imposing a tax of 22-25 per cent on deposits over €100,000 in Cyprus's largest bank, Bank of Cyprus, could be voted on today.

The ruling Democratic Rally and its partner, the Democratic Party, which hold 28 of the 56 seats, would vote in favour of the new proposal, according to the source. The Communist Akel would vote against and the socialists would abstain, allowing the measure to pass, he added, allowing the Bill to pass.

Parliament besieged
As banks remain closed, hundreds of Cypriots besieged parliament throughout yesterday, braving high winds. A senior officer of the Laiki (Popular) Bank refused to speak to media but staff members did not hesitate to voice their anger.

“We will lose our savings, our jobs, our homes, our futures. We are taxpayers. We are entitled to unemployment benefits,” one employee said. “We are at war. In a war you lose all. In a war there are bodies in the streets.”

As European authorities increased the pressure to agree a deal, Cypriot finance minister Michael Sarris arrived back in Nicosia after talks with Russia ended without any concrete proposal.

Cyprus had hoped Russia could contribute to a financial bailout of the country, as it tried to put together an alternative proposal to raise the €5.8 billion demanded by the EU-International Monetary Fund as part of a bailout package.

On Thursday, the European Central Bank threatened to withdraw the emergency liquidity assistance it has been providing to Cyprus’ stricken banks by Monday if a rescue plan is not agreed.

Finnish prime minister Jyrki Katainen said it was “fair and right” that a solution to the Cyprus crisis should include a greater burden on holders of big bank deposits.