Cyprus ordered banks to stay shut for another five days as ministers scrambled Wednesday to draw up a Plan B aimed at securing a bailout after parliament rejected a controversial tax on savings.
A woman carrying shopping bags walks past a man playing the clarinette on Nicosia's Ledra street on March 20, 2013. Debt-hit Cyprus scrambled on Wednesday to draw up a Plan B to secure an EU bailout after MPs rejected an unprecedented bank deposit levy, while also seeking to limit the amount of money leaving the island.
In an early setback, however, Finance Minister Michalis Sarris failed to make progress in Moscow talks to secure aid as a tough-bargaining Russia sought lucrative assets in exchange for further help.
The cabinet went into an evening crisis session to weigh the alternative plan and to look at legislative bills designed to limit capital outflows and restructure the troubled banking sector, media reported.
"We will not sleep tonight until we find a solution," said Averof Neophytou, acting leader of the ruling Disy party. "I am confident we will find a solution so we do not go bankrupt."
The finance ministry said banks, which last opened their doors on Friday, would remain closed again on Thursday and Friday "on grounds of public interest in order to ensure financial stability".
With Monday a scheduled public holiday, there is no prospect of any banking transactions before Tuesday, amid fears of a run on accounts by spooked deposit holders.
State radio said bills had been drafted to restrict the outflow of cash from the island once the banks reopen. These would need to be passed by the cabinet and by parliament.
The legislation would also split the sector into "good banks" and "bad banks", it said.
The authorities spent Wednesday in frantic talks, including with political party leaders and central bank officials, to hammer out their Plan B, which an MP said was unlikely to be finalised before the weekend.
The scramble began after MPs Tuesday night flatly rejected a measure that would have slapped an unprecedented one-time levy of up to 9.9 percent on bank deposits as a condition for an EU-led 10-billion-euro ($13-billion) loan.
The troika of the European Union, European Central Bank and International Monetary Fund agreed the bailout on Saturday on condition Cyprus raised another 5.8 billion euros through a levy on bank deposits.
It refused to offer more than 10 billion euros because that would raise Cyprus' debt burden to unsustainable levels way above the IMF benchmark of 100 percent of gross domestic product.
IMF statutes prevent the fund from lending money to states that may be unable to pay it back.
Options Cyprus was reportedly considering in order to meet the shortfall include raising money from domestic sources including provident funds, and restructuring the teetering banking sector.
While money is still available from ATM cashpoints, the dwindling liquidity has seen petrol stations close their credit card facilities and many stores refusing cheques.
The head of the powerful Orthodox Church in Cyprus, Archbishop Chrysostomos II, offered to help by putting church assets at the government's disposal.
The church is the largest landowner in Cyprus and also has stakes in businesses including the island's Hellenic Bank, with estimated total assets of tens of millions of euros.
President Nicos Anastasiades' office said he had called another meeting of parliamentary leaders for Thursday at 0730 GMT.
Following the parliamentary "No" vote, in which ruling party MPs abstained, Cyprus turned to Russia, with Anastasiades sending Sarris to Moscow to woo new assistance and to seek an easing of the terms of a 2.5-billion-euro loan Moscow afforded Nicosia in 2011.
Russians have $31 billion in private and corporate cash deposited in Cypriot banks.
Russian Prime Minister Dmitry Medvedev said the bailout had been bungled and the solution should not damage Moscow's relations with the EU.
"I hope that in the end the solution adopted will be as thought through as possible and will at the same time aid Cyprus and not harm our relations with the EU," he said.
Sarris, meanwhile, was upbeat after meeting his Russian counterpart Anton Siluanov before talks with First Deputy Prime Minister Igor Shuvalov about a possible new loan, describing it as a "very good beginning".
But a Russian government source said a second round of talks with Shuvalov -- who oversees the financial sector -- produced no results.
Reports said the Moscow talks would continue on Thursday.
Meanwhile, US Federal Reserve chief Ben Bernanke said that, so far, "we are not seeing a major risk to the US financial system or the US economy" from the crisis in Cyprus.
But he added: "I don't think the impact has been enormous" on markets overall, pointing to the rebound Wednesday in European markets.