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thomas davison

Thursday, Mar 21 2013 12PM
European leaders lose patience as ECB gives Cyprus until Monday to accept bailout deal or face bankruptcy

By Matt West

PUBLISHED: 11:58, 21 March 2013 | UPDATED: 13:46, 21 March 2013

The European Central Bank today gave Cyprus until Monday to accept the terms of the �10billion (�8.7billion) bailout package agreed over the weekend - or face its cash-strapped banks being cut off from funding altogether.

European leaders appeared to lose patience with the country after lawmakers rejected a softened levy on savers� bank deposits on Tuesday - which would have seen those with savings of more than �20,000 lose 6.75 per cent of their savings and those with over �100,000 (�86,490) lose 9.9 per cent.

The threat came as the man leading the eurozone's efforts to reach a deal, Jeroen Dijsselbloem, said the original bailout offered by EU leaders on Saturday was not dead and that Cyprus had few alternatives but to accept it.
Cyprus Crisis: protests have continued in Cyprus since details of the EU bailout deal emerged over the weekend.

Cyprus Crisis: protests have continued in Cyprus since details of the EU bailout deal emerged over the weekend.

He added Russia was not going to come to Cyprus's rescue with new loans and any bailout of the Mediterranean island would have to involve some kind of levy on depositors.

�It's probably inevitable there will be some kind of levy in the final package that we will agree upon,� Mr Dijsselbloem told MEPs in Brussels earlier today.

�The levy I can strongly defend, because it is a direct way to ask a contribution of the deposits of the banking sector in Cyprus, which is inevitable if you want to a build a package which doesn't bring more loans and more debt to Cyprus,� he said.

And the ECB piled on the pressure on the Cypriot government earlier issuing a statement warning it would only continue to support the Cypriot central bank�s provision of emergency funds to its own banks until Monday, effectively telling Cyprus it would cut off supply to the county�s banking system if it failed to agree to the bailout.

The Cypriot central bank has been providing its banking system with ECB-backed Emergency Liquidity Assistance. Cyprus�s sovereign bonds are ineligible for use as collateral for more orthodox ECB refinancing operations after the country's credit rating was downgraded to junk status last year

But while the emergency loans are more easily available, the ECB's governing council must approve them.

Cypriot banks are hugely reliant on ELA for funding. At the end of January, they had taken around �9.1 billion from the country's central bank through the programme.

The country's banks have taken only �376million from regular ECB liquidity operations after the ECB stopped accepting Cypriot government bonds as collateral last June.

ECB policymaker Joerg Asmussen, said yesterday the ECB can only allow the provision of emergency liquidity to solvent banks, and that without an aid programme to recapitalise Cypriot banks their solvency �cannot be assumed�.
Bank run: fears of a run on the banks in Cyprus when they reopen next week heightened today after the ECB said it would cut off emergency funding on Monday.

Bank run: fears of a run on the banks in Cyprus when they reopen next week heightened today after the ECB said it would cut off emergency funding on Monday.

European markets were down across the board today as investors watched the Cypriot crisis nervously. There are fears the levy on saver's deposits in the country will set a precedent which could spark a run on the banks in other vulnerable euro zone countries like Spain and Italy.

The FTSE-100 index was 49 points, or 0.76 per cent, lower in the morning session at 6383.5, France's blue-chip stock index the CAC 40 was 1 per cent lower at 3789.78 and Germany's leading index the DAX was 0.78 per cent lower at 7939.44.

Official euro zone manufacturing figures showed business expansion in Germany also lost momentum weighing on sentiment across European markets and adding to fears of yet another chapter of crisis on the continent. The figure for the month fell to 51.0 from 53.3 in February. For France, the figure dipped to 42.1 for March from 43.1 in February - which continued to mark a contraction in the sector.

The continuing crisis in the Mediterranean island prompted the British government to airlift �1million (�852,600) late on Monday in what the Ministry of Defence (MOD) called a contingency measure to help troops based there with their families.

Some 3,000 service personnel are based on the Mediterranean island and there is also a large expat community.

The original agreement - hammered out between Cypriot president Nicos Anastasiades and the so-called troika of the European Union, ECB and International Monetary Fund (IMF) on Sunday - included a raid on all bank deposits and provoked outrage among Cypriots who protested outside the country�s parliament. In return for �10billion in rescue money from the troika Cyprus agreed to raise �5.8 billion itself through other means.

It also emerged today that the Cypriot government decided not to take part in a conference call with eurozone finance officials on Wednesday, a decision that several participants to the call described as troubling and reflecting the wider confusion surrounding the island's predicament.

Officials acknowledged being 'in a mess' over Cyprus during the call which discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy.

One official described emotions as running �very high�, making it difficult to come up with rational solutions, and referred to �open talk in regards of (Cyprus) leaving the euro zone�.

They added the Cypriot parliament was� obviously too emotional� and could �not decide on anything�.

It is the first time the possibility that Cyprus could leave the eurozone has been mentioned. European officials fear a the effect of a flight of capital out of Cyprus�s banks when they reopen as Russian and British account holders try to rescue their savings.

They are also worried about the impact of the Cypriot exit from the euro on the rest of the eurozone and in particular the danger poised to the island�s near neighbour, Greece

And yet I bet there is enough left for a bankers bonus

And Russia fills the gap, Germany loses the financial war it started, and the Kremlin have a seat on the EU's councils. Meanwhile, half of the Euro Zone look to Russia and, maybe, China to help them, and the EU is conquered bloodlessly as against Merkel's new 'war in Europe'. What happens in Cyprus today, will happen elsewhere in the Euro Zone tomorrow. Any odds on which country is next? After all, Merkel and the EU said they would do everything needed to stop a default, to preserve the Euro, she obviously meant that Cyprus, Greece, Italy, Spain, Portugal, Ireland and France could go to the dogs, or in this case Moscow.

2Anne · Joined: 04 May 2008 Posts: 399 Location: Norfolk

The Cypriots are a bunch of thieves. My sister lived for 10 years in Cyprus and said the corruption there was rife.
Cyps were selling houses to Brits for �2K grand and in league with corrupt solicitors also taking out mortgages on them that became the responsiblility of the owner. They also refused to give deeds on new properties unless huge amounts of extra money was paid.
They lied and cheated their way into the Euro and are terrified of the Russians as its the mafia who are likely to lose their cash when Cyprus goes bust. There will be reprisals and murder.
I had bad experiences on holiday in Cyprus and would not go back there.
They deserve everything they get. Power on the island is vested in a few rich families and money given by the EU for infranstructure improvements went straight into back pockets.
Ha Ha!! Good riddance Cyprus and bent Cyps.