Cyprus in last-minute talks to save economy

Updated: Sunday, 24 Mar 2013 23:11

Cypriot President Nicos Anastasiades has held last-minute talks with international lenders as doubts grow about whether a deal could be reached to save Cyprus from financial meltdown.

Mr Anastasiades spent hours arguing with the heads of the European Union, the European Central Bank and the International Monetary Fund over terms for a €10bn bailout.

Without a deal by the end of Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the eurozone.

A senior source involved in the talks told Reuters Mr Anastasiades had threatened to resign in a heated exchange over a proposal to shut down two Cypriot banks, but there has been no official confirmation.

EU diplomats said the president is still fighting to preserve the country's business model as an offshore financial centre that drew huge funds from wealthy Russians and Britons.

The key issues in dispute are how Cyprus should raise €5.8bn from its banking sector towards its own financial rescue and how to restructure its outsized banks.

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The Cypriot government and political parties remain divided and talks in Nicosia broke up early this morning without a result after angry bank workers demonstrated to save their jobs.

Mr Anastasiades, who was flown to Brussels in a private jet by the European Commission, held several hours of tense negotiations.

Those talks delayed a crunch meeting of eurozone finance ministers by almost four hours.

A Cypriot government spokesman said earlier the president and his team had a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default".

€100 limit imposed on ATM withdrawals

With banks closed for the last week, the Central Bank of Cyprus imposed a €100 per day limit on withdrawals from cash machines at the two biggest banks to avert a run.

The speaker of the Cypriot parliament Yannakis Omirou has called for calm in the country.

He said: "I call on people not to create different scenarios, spread rumours and whispers which could create or give wrong impressions or wrong messages.

"This is a time for responsibility ... and everybody needs to keep their cool."

Minister for Finance Michael Noonan said he believes agreement on a bailout for Cyprus will be secured tonight.

Speaking in Brussels, Mr Noonan said the move to hit depositors at Cypriot banks had been a "design" of the government of Cyprus, even though some ministers had misgivings.

He said: "I think a deal will be done tonight, but I think it will be late, because a lot of detail has to be worked out."

French Finance Minister Pierre Moscovici rejected charges that the EU had brought Cypriots to their knees, saying it was the country's offshore business model that had failed.

"To all those who say that we are strangling an entire people ... Cyprus is a casino economy that was on the brink of bankruptcy," he told Canal Plus television.

German Finance Minister Wolfgang Schaeuble said there had been little progress since last weekend's attempted bailout deal involving a levy on all bank deposits, which the Cypriot parliament overwhelmingly rejected.

However, he said he hoped people in Cyprus now had "a somewhat realistic view of the situation".

Mr Schaeuble said the financial numbers had worsened, if anything, in the intervening week.

Asked what a solution would look like, he said: "What we agreed last week."

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