Cyprus has just four days to agree on a new plan to raise much needed funds to avoid bankruptcy. The European Central Bank warned Thursday it would stop propping up the country's banks if no solution was found.
Scrambling to devise a "Plan B" that would secure the much needed 5.8 billion euros ($7.5 billion) demanded by international creditors in exchange for an increased bailout package for the embattled nation, party leaders raced to devise a plan that would appease both Parliament and the country's international creditors.
One measure agreed on by lawmakers on Thursday was the establishment of an "Investment Solidarity Fund" that would be financed through donations from Cypriots, business people and foreign investors, said Demetris Syllouris, head of a small right-winged party who was in talks with the government.
Legal and technical details are sill being finalized, with the bill being reviewed by the Cabinet Thursday evening, Christos Stylianides, a government spokesperson said.
"We will have a program of support for Cyprus by Monday," central bank governor Panicos Demetriades said as he left a meeting with Cypriot President Nicos Anastasiades and other party leaders.
It is unlikely a deal would be met in time for it to be voted on during Thursday's parliamentary session, Averof Neophytou, deputy head of the governing DISY party said.
Cypriot Finance Minister Michael Sarris is in Moscow to discuss further Russia investments in the country's banks and energy resources to reduce its debt burden. Russia will likely provide some financial assistance, though its contribution will be far smaller than first thought, officials said.
Russia's help would not be in the form of a loan, but instead some sort of investment, Sarris told Cypriot state broadcaster CyBC on Thursday.
Banks across Cyprus will remain closed for the rest of the week and will not reopen until Tuesday next week. The Cypriot stock exchange has suspended trading for Thursday and Friday.
The European Central Bank (ECB) warned Thursday it is only able to provide Cyprus with emergency funding until next Monday.
"Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if a [joint European Union-International Monetary Fund] program is in place that would ensure the solvency of the concerned banks," the ECB's governing council said in a statement.
On Wednesday, ECB executive board member Joerg Asmussen made clear that Cyprus' banks could not depend on funding if Nicosia was unable to agree to a bailout plan, along with a commitment to restructuring the country's banking sector.
The ECB is only able to provide funds to banks that are solvent and their solvency would not be assured "if an assistance program for Cyprus that guarantees a rapid recapitalization of the banking sector is not agreed upon soon," Asmussen said.
Meanwhile, the head of the eurozone, Jeroen Dijsselbloem, told EU parliamentarians meeting in Brussels to discuss the financial crisis in Cyprus that the country should plan a "more fair balance" as it tries to redraft the controversial bank levy.
"The Eurogroup felt it was very important that there should be a fair burden-sharing. We were of the opinion that the burden on large deposits should be larger than on small deposits. We're still of that opinion," Dijsselblom said Thursday.
jlw/dr (Reuters, AP, AFP, dpa)