Cyprus president feeling heat in Brussels bailout marathon
- Published: 24/03/2013 at 12:49 PM
- Online news:
Cypriot President Nicos Anastasiades faced intense pressure Sunday from Brussels bailout bosses in marathon talks, as the clock ticked on a deadline to avert bankruptcy and a potential exit from the euro.
People stand behind a placard asking for a referendum as they protest outside the parliament in Nicosia on March 24, 2013. Cypriot President Nicos Anastasiades faced intense pressure Sunday from Brussels bailout bosses in marathon talks, as the clock ticked on a deadline to avert bankruptcy and a potential exit from the euro.
A gathering of eurozone finance ministers only got under way at around 2100 GMT, four hours late, after Anastasiades was locked in discussions for eight hours with the heads of the European Central Bank, International Monetary Fund, European Union and eurozone.
"We will do our utmost for Cyprus," the president had said on Twitter going into the evening talks.
But facing painful choices whichever way he turns in the battle to unlock urgently-needed bailout cash, sources at the presidential palace in Nicosia told state media his frustration later boiled over.
"Do you want to force me to resign?" the Cyprus News Agency quoted Anastasiades as telling the bailout bosses.
The crunch talks in the snow-covered Belgian capital were called after the ECB threatened to halt life-support funding for Cyprus on Monday if there was no deal.
Governmental sources told AFP the Eurogroup was only brought in to bring ministers up to date -- with the key Anastasiades talks set to stretch deep into the night.
The banks in Cyprus were due to re-open on Tuesday after a 10-day shutdown, although as the talks progressed, the two biggest lenders on the island slashed cash machine withdrawal limits as low as 100 euros per day.
Cyprus has agreed to break up one of these banks and move big deposits into a new "bad" bank that will see a "haircut" forced on investors whose money will likely remain tied up for years.
But Nicosia was resisting the pressure on the biggest one, the Bank of Cyprus, which holds a third of all deposits on the island.
Bailout bosses are demanding what French Finance Minister Pierre Moscovici called a "just" contribution from the very biggest depositors -- including Russian oligarchs and Moscow government agencies.
Otherwise, a promised 10 billion euros ($13 billion) of taxpayer loans would not be forthcoming, leaving Cyprus facing default and an ousting from the single currency area.
It was time to put an end to "casino economy" practices on Cyprus, Moscovici insisted.
"If we don't, it's you, it's me, it's all of us who will be left picking up the tab," he underlined.
-- 'Decision lies in Cyprus' --
German Finance Minister Wolfgang Schaeuble said the Cypriot government needed to adopt a "realistic" view, as a follow-through meeting with Eurogroup finance ministerial peers was pushed back twice already after six hours of talks.
"It's not about us -- the decision lies in Cyprus," said Schaeuble.
As Anastasiades consulted with party leaders back in Nicosia, key ministers said the overall numbers had not changed from a week ago, when an initial plan to raid all savings collapsed amid public anger.
The idea now is that only deposits over 100,000 euros, the cut-off for an EU-level insurance guarantee, are hit.
With Cyprus looking for a 17-billion euro rescue overall, that meant a rough total of seven billion to be found via the bank "haircut," a wealth tax for lesser banks, local tax changes, privatisations and other creative avenues.
"I'm expecting a long night. I think a deal will be done tonight, but it will be late," Irish Finance Minister Michael Noonan said.
"There are no longer any optimal solutions available. There are only hard choices left," EU economics head Olli Rehn warned beforehand.
He acknowledged that Cypriot leaders are trapped, after a firestorm of protest over the previous weekend's attempt to impose a blanket savings grab.
Anastasiades met first with ECB head Mario Draghi, IMF managing director Christine Lagarde, EU president Herman Van Rompuy, European Commission head Jose Manuel Barroso, Eurogroup chair Jeroen Dijsselbloem and Rehn.
The volume of Cyprus sovereign aid is a pittance compared with Nicosia's closest ally Greece, which needed hundreds of billions all told in the eurozone's first bailout begun almost exactly three years ago.
The worry, though, among some leaders and economists was that fallout from the current crisis could still infect other troubled economies like Spain and Italy.
Spanish Finance Minister Luis De Guindos said contagion could become an issue if a deal was not done soon.
The haircut would take the form of a bond or share swap in a bid to get the measure through parliament, after Cypriot lawmakers flatly rejected the levy on all deposits.
But EU sources said a problem remained over liabilities due to the ECB.
UniCredit analyst Erik Nielsen reckoned "Cyprus will cave in," although he warned of "some drainage of Cypriot deposits after the banks re-open", which would mean the ECB extending emergency financing a little.
University of Maryland professor Peter Morici said a euro exit could be to Cyprus's advantage, citing Iceland's rapid recovery from its crash precipitating the 2008 global financial crisis.
About the author
- Writer: AFP
Position: News agency