Cyprus eyes bailout deal, U-turn on levy

Fri Mar 22, 2013 1:44pm EDT
 
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By Michele Kambas and Costas Pitas

NICOSIA (Reuters) - Cyprus was just hours away from a deal on Friday to raise billions of euros and unlock a bailout from the European Union that could avert financial meltdown and exit from the euro, its ruling party said.

The remarks came after Moscow had rebuffed requests from Nicosia for assistance to save Cypriot banks in which Russians have billions at risk and at least one euro zone minister, Finland's Alexander Stubb, said an EU accord would be reached.

Averof Neophytou, deputy leader of the ruling Democratic Rally party, said Cypriot political leaders were close to a compromise that would let parliament reverse its rejection of a rescue package offered by euro zone partners a week ago under which holders of bank deposits would suffer losses.

Finance Minister Michael Sarris, returning empty-handed from Moscow, said a bank deposit levy was back "on the table".

Germany warned Cyprus it was "playing with fire", with the clock running down to a Monday deadline set by the European Central Bank when it will sever essential cash flows to Cypriot banks if no bailout program is agreed.

Neophytou said there was "cautious optimism that in the next few hours we may be able to reach an agreed platform" consistent with the framework originally agreed with the EU.

In Finland, an ally of Germany in disciplining their euro zone partners, European affairs minister Stubb told Reuters he was confident Cyprus would accept terms for an EU rescue: "Why am I optimistic? Because there are no other options," he said. "They'll find a solution, if not today then over the weekend."

Loss of the ECB lifeline would effectively cause the banking system to collapse and could force Cyprus to give up the euro.   Continued...

 
Protesters shout slogans during an anti-bailout rally by employees of Cyprus Popular Bank outside the parliament in Nicosia March 22, 2013. REUTERS/Andreas Manolis