Cyprus Still in Crisis as Monday Deadline Approaches
It’s just a little island with a population of 1.1 million but Cyprus has the world’s attention.
If its government does not come up with a viable plan to fund a portion of the financial bailout it desperately needs there will be no bailout and Cyprus would mostly have to leave the Eurozone. That, in turn, could fuel fears of additional departures by other ailing member nations such as Greece and Spain.
The clock is ticking. Cyprus has until Monday to present a plan to fund 5.8 billion euros ($7.5B). Only then will the ECB, European Commission and IMF—known as the troika--provide 10 billion euros ($13 billion) in bailout funds.
Earlier this week the Cypriot legislature voted down a plan that would tax depositors to help fund the bailout. And yesterday Russia declined to make a deal that would reportedly trade natural gas field production for Russian loans.
Today the Cypriot legislature is scheduled to vote again. They will consider several alternative plans that will reportedly include restructuring the country’s two largest banks—creating a good and bad bank—limiting noncash transactions, checking and withdrawals, and possibly taxing deposits but not those with less than 100,000 euros.
“The next few hours will determine the future of this country,” said government spokesman Christos Stylianides. “We must all assume our responsibility.”
In the meantime, “what we have now is a big fat nothing,” says Lauren Lyster of The Daily Ticker, about the situation in Cyprus.
But The Daily Ticker’s Aaron Task says a Russia deal is still possible. “Vladimir Putin could come in at the very last minute and say ‘I will save the Eurozone,” says Task.
It’s not that farfetched an idea. About 30% of the deposits in Cyprus banks come from Russia.
In the meantime Cyprus agreed to spin off Greek units of debt-ridden Cypriot banks, banks and stock exchanges remained closed and the euro rose.
In the U.S. stocks opened higher. Stay tuned.
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