NICOSIA, March 20 (Xinhua) -- The Cypriot government announced on Wednesday that banks will remain closed for five more days as politicians and technocrats probe ways of urgently raising funds to close a gap created when parliament rejected a levy on bank deposits.
The ministry of finance issued a decree declaring Thursday and Friday as bank holidays. As Monday is also an established holiday, banks will re-open on March 26.
The government hopes that by that time it will be able to work out a way of raising 5.8 billion euros (7.5 billion U.S. dollars) demanded by international lenders before they consent to a bailout for Cyprus worth 10 billion euros.
The Cypriot parliament on Tuesday rejected a bill imposing a scaled levy on bank deposits over 20,000 euros, throwing into disarray negotiations with the troika on the bailout package.
The levy was designed to generate enough cash money for the recapitalization of the banking system so as to keep the total sovereign debt sustainable.
Ministry of finance and Central Bank officials worked throughout the day on a plan to issue bonds covered by future proceeds of natural gas development, expected to start in 2018.
This has to be done in a way acceptable to the troika technocrats negotiating with the Cypriot government on behalf of the European Commission, the European Central Bank and the International Monetary Fund.
At the end of hectic day of negotiations, the troika was reported to have turned down some of the plans put forward by the government. They said the 5.8 billion euro amount must be in cash and also not the product of either a loan or an issue of bonds by the government itself as this would increase the sovereign debt.
To work around this obstacle, the government is working on a plan to establish a private company, to which it will transfer government assets, including future gains from natural gas. This company will then issue the bonds to be offered to the public and also to bank depositors.
The state broadcaster reported that the government is also working on plans to establish one or two new banks to take over the good portfolios of up to 100,000 euros of the two largest lenders, Bank of Cyprus and Cyprus Popular Bank.
The two banks will either be left to go bankrupt or their bad portfolios will be taken over by another new bank.
Ahead of the reopening of the banks next week the government has prepared a bill providing for controls over the withdrawal of money from the banks.
Details have not yet been finalized, but the idea is to allow depositors to withdraw money only up to an amount to be fixed so as to avoid an uncontrolled run on deposits.
Bank cash machines are constantly replenished, giving people access to limited amounts of cash.
The Cypriot government met in an extraordinary session on Wednesday night and it was also announced that a meeting of party leaders under President Nicos Anastasiades will be held early on Thursday morning -- signaling possible important decisions.
Cypriot finance minister Michael Sarris is engaged in talks with Russian officials in Moscow promoting a request for a new loan of up to 5 billion euros and for the extension by five years of a 2.5 billion euro loan maturing in 2016.
Sarris said after talks with his Russian counterpart Anton Siluanof on Wednesday that there had been no results, but he would stay in Moscow in the hope of getting a positive answer from the Kremlin.
Officials of the worst-hit Cypriot lender, Cyprus Popular Bank, are also in Moscow negotiating selling part or the whole of the bank to Russian investors.
But the government spokesman in Nicosia said there was no truth in reports that the bank has already been sold to Russians.
In a related development, talks are in progress in Athens for a Greek lender to take over the operations of the two largest Cypriot banks in Greece.
Reports said that an agreement has been reached in principle but it will not be announced before plans for the operations of the two banks in Cyprus are finalized.
BRUSSELS, March 20 (Xinhua) -- The European Commission on Wednesday urged Cypriot authorities to present an alternative scenario of "bail-in" after its parliament vetoed government plan of deposit tax.
"It is now for the Cypriot authorities to present an alternative scenario respecting the debt sustainability criteria and corresponding financing parameters," the Commission said in a statement. Full story