Live blog (March 21): Cyprus in crisis

Cypriot lawmakers postpone a crucial debate and vote in parliament until Friday 10am

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The European Central Bank said the country has until Monday to put the plan into action or face losing emergency funds for its crippled banks and certain bankruptcy. In Moscow, talks are continuing between the island's finance minister and the Russian government on possible aid

Cypriots protest outside parliament in Nicosia on Thursday evening (Reuters) Cypriots protest outside parliament in Nicosia on Thursday evening (Reuters) 23.15 And if Cypriot MPs can call it a night, so can we. Thanks for being with us today and see you tomorrow from 9am onwards! Good night!

22.40 And reporting from Nicosia, EnetEnglish's John Psaropoulos hears from officials at Laiki Bank, who believe the announced "resolution" of the bank is likely to mean closure. Said one official on condition of anonymity:

By 'resolution' I don't understand 'restructuring' or division into a good and a bad bank. Our information is that all unguaranteed assets of over 100,000 euros will simply be taken to cover nonperforming loans and other liabilities. Essentially, it will destroy the bank.

22.30 Cypriot lawmakers postpone crucial debate/vote in parliament until Friday 10am.

22.20 Cypriot Finance Minister Michael Sarris refuses to answer questions about whether he managed to secure a deal with Moscow. His reply to reporters after a meeting at the Russian finance ministry is "No comment".

22.10 Here's what Cypriot lawmakers are debating. The first bill concerns the movement of capital. The second concerns Laiki Bank and the third is about the Solidarity Fund. The copies of the bill were obtained by Athens daily Eleftherotypia.

22.00 Eurozone finance ministers wrap up their meeting. They are waiting now for Cyprus to present its new rescue plan. They also say its vital for Cyprus to guarantee deposits under 100,000 euros.

21.25 The Cypriot government submitted its first bill to parliament giving the finance minister or central bank governor the right to impose capital controls on banks. "The purpose of this law is, in case of an emergency for purposes of public order or security, to assign powers to the (Finance) Minister, or the (Central Bank) governor to take and impose temporary restrictive measures, including restrictions on capital controls," said the bill, a copy of which was seen by Reuters.

21.10 Eurozone finance ministers are discussing a plan to shut Cyprus' two biggest banks and freeze assets of uninsured depositors, reports Bloomberg. Under the plan, Laiki Bank and the Bank of Cyprus would be split to create a "bad bank".

21.05 Cypriot cabinet meeting ends. President Nicos Anastasiadis and ministers now heading to parliament.

20.30 Eurozone finance ministers have started their conference call to discuss Cyprus, reports Bloomberg.

20.10 Two bills are now before the Cypriot parliament, according to Cyprus' state TV RIK. The first is about the Solidarity Fund. The second concerns the movement of capital. Another seven bills concerning the banking sector are reportedly pending

19.50 Cyprus central bank governor says one of the draft laws tabled in the parliament foresees the resolution process for Laiki Bank. He says this will avert bankruptcy and "disastrous consequences" and protect depositors up to 100,000 euros.

19.35 Cyprus Popular Bank (Laiki) imposed a 260 euro per day limit on ATM withdrawals on Thursday to cope with high demand, reports Reuters.

19.10 Senior Turkish officials said Turkey could challenge any move by Cyprus to speed up offshore natural gas exploration as a way of attracting desperately needed investment.

19.05 Cypriot President Nicos Anastasiades is holding a cabinet meeting ahead of parliament's plenary session scheduled to start at 7pm.

19.00 Finance Minister Yiannis Stournaras is meeting now with the heads of the Bank of Greece and the Hellenic Financial Stability Fund (HFSF) to assess the situation in Cyprus.

18.35 Eurozone finance ministers will hold a conference call at 8pm to discuss the situation in Cyprus.

18.00 Large crowds are gathering in central Nicosia, many of them employees of Laiki Bank, which the central bank is insisting is not facing closure, despite early media reports on Cypriot state TV.

17.55 Cyprus central bank spokeswoman, Aliki Stylianou, calls state TV RIK to deny that Laiki (Popular) Bank is to close. She referred to restructuring but underlined that "restructuring does not mean closure".

17.35 Cyprus state TV RIK is reporting that Laiki (Popular) Bank is shutting down and plans are afoot for the creation of good/bad banks.

17.20 Main opposition Syriza leader Alexis Tsipras called a press conference in Athens to express his support for the people of Cyprus. He criticised the government for its handling of the situation. “We are by the side of our Cypriot brothers,” he said. “Our ‘we’ means ‘we’ Greeks and Cypriots who do not give up without a fight.”  

17.00 Sources inside the Cypriot parliament tell EnetEnglish the following:

  • Tonight's bill will be about the formation of the Solidarity Fund only.
  • The Solidarity Fund will at this point be comprised only of the pension and health maintenance funds of the civil service and semi-state organisations like telecoms and ports
  • The fund's value is estimated at 3bn. It is therefore only the start of the process of building Plan B
  • The bill is given final approval by the cabinet at 6pm
  • Parliament's plenary session starts at 7pm
  • A vote is expected an hour to two hours later from 8-9pm
  • There is a strong possibility of a broad, cross-party or even unanimous approval 
16.30 The euro fell against most currencies after growing uncertainty in Cyprus and surveys showed a struggling eurozone economy, with softer-than-expected German business activity data casting doubts about a recovery in Europe's largest economy. The euro dropped to a session low of $1.2879, nearing the four-month low of $1.2843 hit on Tuesday, and was last at $1.2904, down 0.2% on the day. It also hit a five-week low against the British pound and at one point shed more than 1% against the yen. The euro was last at 85.21 pence, down 0.5%, while it last traded at 122.76 yen, down 1.1%. The single eurozone currency also dropped 0.7% against the Australian dollar at A$1.2374, falling 0.4% to C$1.3210 versus the Canadian currency. 

15.40 Cyprus' parliamentary speaker Yiannakis Omirou told reporters that talks were likely to go on for a few more days. Pressed by a reporter as to whether Cyprus might exit the eurozone, Omirou said: "Inside the euro, yes. Inside euro, inside European Union, inside eurozone. We are a member country."

14.45 And back to Moscow. Cypriot Finance Minister Michael Sarris has been speaking to the press. According to Bloomberg Athens, he said that Russia cannot provide Cyprus with a loan but is considering making investments. That aid would make up part of the 5.8bn euros that Cyprus is seeking. Russia is unable to provide loans given the uncertainty over the European situation. Sarris also confirmed that Cyprus Liaki (Popular) bank has most pressing needs.

14.30 So what's life like for small businesses in Cyprus? A Reuters dispatch finds that shoppers are scarce in the usually busy streets of central Nicosia, preferring to keep their cash in their pockets rather than spending it.

13.40 Cyprus decided not to take part in the Eurogroup Working Group teleconference on Wednesday, a decision that several participants described as troubling and reflecting the wider confusion surrounding Nicosia's predicament. In an exclusive, Reuters, which has seen notes from the meeting, Eurozone finance officials acknowledged being "in a mess" over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy. In detailed notes of the call seen by Reuters, one official described emotions as running "very high", making it difficult to come up with rational solutions, and referred to "open talk in regards of [Cyprus] leaving the eurozone".

13.00 Against expectations, Cyprus' parliamentary speaker is saying that the controversial savings levy is not part of the Plan B being discussed by the country's political leaders. Speaking to reporters, Yiannakis Omirou said:

We didn't discuss a [deposit] haircut and we are not reverting to it.

Meanwhile, the deputy leader of the ruling Democratic Rally party, Averof Neofytou, said he does not expect the revised plan to be ready for a parliament vote on Thursday. He said party leaders had unanimously agreed to create a "solidarity fund", which officials say would bundle state assets as the basis for an emergency bond issue.

12.35 Several hundreds employees of the three Cypriot bank subsidiaries in Greece - Bank of Cyprus, CPB and Hellenic - have staged a protest outside the finance ministry in Athens. Holding banners and shouting slogan, the employees are demanded a meeting with Finance Minister Yannis Stournaras.

12.20 Anger in Russia over so-called oligarchs having bank deposits in Cyprus has led to the arrest of an activist belonging to The Other Russia opposition group, according to Reuters. Russian interior ministry officers detained the activist as the group attempted to capture the headquarters of the central bank, in Moscow.

11.55 "Like a bull in a china shop". That's how Russian Prime Minister Dmitry Medvedev described the European Union in its dealings with Cyprus. Medvedev, reflecting the outrage among Russians with bank accounts in Cyprus that they may have to contribute to the rescue of Cypriot banks, compared the savings levy to Soviet-era confiscations.

11.40 And how are the markets this morning? European shares are down this morning as investors, already jittery over the Cypriot debt crisis, were confronted with data showing Germany's business activity lost steam in March.

The FTSEurofirst 300 was down 0.5% at 1,193.22 by 11.17, led down by mining stocks, among the most sensitive to market nervousness. The index, with a 0.8 percent fall so far this week, is on course for its biggest weekly drop since November. The price of oil also fell as traders awaited a solution to the Cypriot crisis. Benchmark oil for May delivery was down 23 cents to $93.27 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract for April delivery gained 80 cents to settle at $92.96 a barrel on Wednesday.

But some investors remained relatively unfazed about the situation in Cyprus, which they viewed as a short-term worry, such Terry Torrison, managing director at Monaco-based McLaren Securities:

I think (Cyprus) is very much just a stumbling block and nothing else. I really don't think it's going to stop the market and I don't see a big sell-off on the back of it at all.

Personally I think things like China are much more important.

11.30 Where Cypriots and Greeks have a fundamental difference of opinion (and ties with Russia):

11.25 Have you got relatives or friends in Cyprus who are stuck for a few bob? One way to get money there quick and fast is through MoneyGram, as this shop in Somerset, England, advises. 

In a statement posted on the Cypriot government website on Wednesday, the country's post office also recommended MoneyGram:

MoneyGram money transfer service operates normally

The Department of Postal Services would like to inform the public that “MoneyGram” money transfer operates normally for sending/receiving money to/from students, relatives and other persons in just 10 minutes.

This service is available for person-to-person transactions according to the regulations of the Central Bank of Cyprus at all Post Offices.

11.15 News in from Moscow, where Cypriot Finance Minister Michael Sarris has been since Tuesday for talks with his Russian counterparts. In comments to the press this morning, Sarris confirmed that his government is seeking investments in its banks and energy resources to reduce its debt burden, as well as seeking an extension to an existing Russian bailout loab:.

The banks are the ultimate objective in any support we get, so it'll either be a direct support to the banks or the support that we get through other sectors will be channelled to the banks, because this is our biggest challenge to recapitalise the banks.

There's a lot of teams now working on a number of issues. Banks, natural gas, are there opportunities (on which) we can base some cooperation and some suppport from Russia.

We've asked for help clearly, but something that would make also economic sense for Russia.

Sarris said that Cyprus was seeking a five-year extension of an existing loan of 2.5bn euros from Russia, and a cut in the interest rate to 2.5% from 4.5%. He said Cyprus did not want to borrow more money from Russia.

There are no stumbling issues, there's just work to be done. Understandably, if there is to be help, it has to be connected with a number of economic activities.

11.00 Eurogroup Chairman Jeroen Dijsselbloem says depositors in Cyprus can still expect a savings levy in any revised bailout plan. Defeding the decision to demand a levy of up to 10% on bank savings as part of the proposed troika bailout, he told the European Parliament's s monetary affair's committee:

The levy I can strongly defend, because it is a direct way to ask a contribution of the deposits of the banking sector in Cyprus, which is inevitable if you want to a build a package which doesn't bring more loans and more debt to Cyprus than the 10bn I mentioned before. I still think its probably inevitable there will be some kind of levy in the final package that we will agree upon.

10.25 The European Central Bank announces it will allow Cyprus' central bank to keep providing banks with emergency funding - but only until next Monday when a credible alternative to the proposed 10bn euro troika bailout must be in place.

ECB statement:

The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013. Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.

With Cyprus sovereign bonds ineligible for use as collateral for ECB refinancing operations due to their low credit ratings, the Cypriot central bank is providing banks with Emergency Liquidity Assistance (ELA). The ECB's Governing Council must approve provision of ELA.

10.20 European Commission President Jose Manuel Barroso gets the ball rolling for the heavyweights with this from Moscow where is attending a 'Russia-EU Potential For Partnership' energy meeting.

I'm very concerned with the recent developments in Cyprus, mainly because of the consequences for the citizens of Cyprus. We have in the past solved bigger problems. I hope that this time a solution can also be found.

10.10 These were the words of university student Karoula Kaili to an Associated Press reporter in Cyprus – reminding us of what all Cypriots whilst banks remain shut. They are due to open next Tuesday at the earliest.

"I don't know what to do now. I only have 20 euros, I have to go to Larnaca, I needed to put gas in my car, I don't know what to do, now I am panicking." 


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