Tomahawk, WI 3/20/2013 (BasicsMedia) – I just received an update from CNBC’s mobile app on my iPhone 5 saying that Cyprus’ banks will remain closed until next Tuesday.
Cypriot officials rushed Wednesday to find new ways to stave off financial ruin, including asking Russia for help, after Parliament rejected a plan to contribute to the nation’s bailout package by seizing people’s bank savings.
Tuesday’s rejection of the plan to take a slice of all deposits above 20,000 euros ($25,888) has left the country’s bailout in question. Without the bailout, the Cypriot banking sector would collapse, devastating the economy and potentially causing the country to leave the euro.
That could roil global financial markets as well as endanger deposits in the country even further.
Political party leaders met at the central bank to discuss an alternative plan to raise the 5.8 billion euros ($7.5 billion) the country needs to qualify for 10 billion euros in rescue loans from its fellow euro countries and the International Monetary Fund.
They also discussed not raising the full 5.8 billion domestically, with the rest potentially coming from other sources, such as Russia. Cyprus’ finance minister was in Moscow to ask for support, possibly in the form of an extension on an existing loan.
“We will be here until some kind of agreement is reached,” said Michalis Sarris in Moscow.
Cypriot President Nicos Anastasiades held talks with European and IMF officials but issued no statement on the result. The eurozone and IMF officials must sign off on any Plan B the Cypriots come up with if it is to be approved as part of the bailout.
Anastasiades called a meeting of his cabinet ministers for later Wednesday. The ministers would likely draft a bill to limit the amount of money leaving the country, according to a banking official who spoke on condition of anonymity as they were not authorized to discuss the situation.
The ministers would also try to create a so-called “bad bank,” a fund in which the dump the nonperforming investments of the country’s two largest banks, which lost billions on bad Greek debt.
Cyprus is running on borrowed time, literally.
I do not have a position in any of the companies mentioned in this article.