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Cyprus bailout talks 'at very delicate stage'

Cypriot government says negotiations with EU and IMF set to continue in Brussels, describing situation as "difficult".
Last Modified: 24 Mar 2013 01:11

Talks with the European Union (EU) and International Monetary Fund (IMF) at securing a bailout for Cyprus are "at a very delicate stage" and will continue in Brussels, the Cypriot government has said, describing the situation as "very difficult".

The government said Nicos Anastasiades, the Cyprus president, would travel to Brussels early on Sunday morning,
with a Monday deadline looming to seal the bailout or see the island's stricken banks cut off from emergency funding.

"We are here and we are working vigorously to save the economy"

- Nicos Anastasiades,
President of Cyprus

The island nation conceded on Saturday to a one-off levy on deposits more than 100,000 euros ($130,000) as it raced to satisfy European partners to secure the 10 billion euros ($13bn) needed for emergency loans by Monday's deadline.

Michael Sarris, the finance minister of Cyprus, reported "significant progress" in talks with international lenders.

His counterparts in Europe's 17-nation currency union scheduled talks in Brussels for Sunday to check that the numbers added up.

The EU's Economic Affairs Commissioner Olli Rehn said progress was being made towards a solution.

A senior Cypriot official told the Reuters news agency that Cyprus had agreed with EU and IMF lenders on a 20 percent levy 100,000 euros ($129,879) or more at the number one lender, Bank of Cyprus, and four percent on deposits over the same level at others.

Anastasiades said he was hopeful of reaching a solution to avert collapse and a possible exit from the EU.

"We are here and we are working vigorously to save the economy," Anastasiades posted on Twitter on Saturday.

"We are making every effort. I hope to have a result soon."

Banking reforms

The Cypriot parliament has already approved a package of banking reforms and there is reluctant consensus on a raft of other revenue-raising measures to put to the eurozone ministers for approval on Sunday.

A restructuring to the island's second largest lender Laiki (Popular Bank) passed by MPs on Friday will see all deposits more than 100,000 euros ($129,879) put into a "bad bank" where they will be tied up for years and may never be recovered in full.

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Parliament overwhelmingly rejected on Tuesday a move to tax savings in all the island's banks and the government was battling to come up with a way of satisfying the EU, IMF and European Central Bank without facing a new defeat by MPs that would deliver a fatal blow to the bailout.

State television said the government was seeking a way to impose the levy on deposits of 100,000 euros and more, which under EU rules enjoy no guarantee, without requiring parliamentary approval.

It said discussions were held on making the so-called "haircut" a contribution made by depositors in return for government bonds.

The state CNA news agency quoted a senior official it did not identify as saying the government was not even close to a deal as talks between Anastasiades, troika representatives and party leaders dragged on until nearly midnight (22:00 GMT) on Saturday.

The official attributed the deadlock to "the rigid attitude" of the representative of the IMF, whom he said, "every half hour puts forward a new demand".

The president has invited party leaders to accompany him in a bid to get the necessary legislation through parliament in which his conservative Disy party hold only 20 of the 56 seats.

Sources in the EU said the 27-nation bloc was ready to eject Cyprus from the eurozone if no deal was reached, to prevent contagion of other debt-hit members such as Greece, Spain and Italy.

National strike

Al Jazeera's Peter Sharp, reporting from the capital, Nicosia, said the drive to secure the bailout "still has a course to run".

"The talks are continuing and there's a hope that they'll come up with a deal before the banks are due to open on Monday morning," said our correspondent.

Anger mounted among staff in the island's huge banking sector at the concessions already made that will see Laiki's 600 million euro ($779.271m) pension fund swallowed up in the "bad bank" that will take over the non-performing loans.

At least 1,000 bank staff marched on parliament in Nicosia on Saturday as banking union chief  Loizos Hadjicostis threatened industrial action when banks reopened.

"If you don't secure our pension fund, we will go on strike from Tuesday," he told the demonstrators to chants of support.

Laiki economist Yiannis Tirkides said that savings hived off into the bad bank would be blocked for years while it absorbed the lender's non-performing loans, which he estimated to be about 30 percent of all Laiki lending.

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Source:
Al Jazeera And Agencies
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