As Russia spurned the island nation’s bid for a loan, Merkel told a closed-door meeting of legislators in Berlin today that she’s annoyed the Cypriot government hasn’t been in touch with the so-called troika of international creditors for days, according to a party official who spoke on condition of anonymity because the briefing was private. Cyprus’s decision to test Europe is unacceptable, she told them.
“We’re not ready to accept solutions that are full of wind,” Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union, said after the meeting. “I don’t think it’s appropriate to play poker in this matter, especially when you think that there’s a risk that two banks will become insolvent next Monday.”
European patience with Cyprus is running out as Cypriot lawmakers consider proposals to unlock bailout funds and prevent a financial collapse. They rejected a plan to tax bank deposits hammered out last weekend by the 17 euro-area finance ministers. The ECB will cut off emergency funding to Cypriot banks at the end of Monday, March 25 unless there is a deal.
Finance ministers for the 17 euro countries are also considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, said four European officials yesterday.
‘Slipping Away’
“Time is slipping away,” Luxembourg Finance Minister Luc Frieden said on German RBB-InfoRadio today. “Banks will open again in Cyprus on Tuesday and a solution is absolutely necessary, because this is not just about Cyprus, it also concerns Germany, Luxembourg and the stability of the euro zone. We need a credible plan.”European stocks erased their losses with the Euro Stoxx 50 index trading up 0.1 percent at 12:18 p.m. in Berlin as investors anticipated a compromise. The euro, which posted its biggest two-day decline since July at the start of the week, rose 0.4 percent to $1.29565.
Cyprus must now act quickly, Merkel said, according to the party official. The German parliament may need to meet over the Easter break to consider Cyprus, Volker Kauder, CDU floor leader, told reporters.
Euro-area finance ministers expect a proposal from Cyprus “as rapidly as possible” to raise the 5.8 billion euros ($7.5 billion) needed to trigger the emergency loans, they said in a statement late yesterday after holding a teleconference.
Keep Talking
Once Cyprus presents its new proposal and the troika has analyzed it, euro chiefs are prepared to continue negotiations on a bailout program, “while respecting the parameters defined earlier,” they said. Ministers reiterated the importance of fully guaranteeing bank deposits of less than 100,000 euros.The next few hours will determine the future of Cyprus, government spokesman Christos Stylianides said today. He said the parliament will convene shortly and negotiations with the troika, which comprises the ECB, the International Monetary Fund and the European Commission, have reached a sensitive point.
The commission has “moved into top gear” on the Cyprus talks, spokesman Simon O’Connor said at a press conference in Brussels today.
Compromise Sought
The race for a compromise comes after a week of tumult marked by Cypriot lawmakers’ rejection of the tax on bank deposits. That was demanded by the other 16 euro countries and the IMF as the condition for a 10 billion-euro rescue.The Cypriot central bank proposed a bill late yesterday to overhaul the banking system that would allow Cyprus Popular Bank Pcl (CPB), the country’s second-largest lender, to avoid a “catastrophic” bankruptcy and protect insured deposits up to 100,000 euros.
The government also submitted a draft law to create an “investment solidarity fund,” state-run CYBC television reported. The fund is intended to help raise the 5.8 billion euros needed to trigger loans, Athens News Agency reported.
Euro-area finance chiefs still insist that Cyprus comes up with 5.8 billion euros, and that it undertakes “substantial changes” to its financial sector burdened by “four big Cypriot banks that are not viable,” said Frieden.
‘Wiggle Room’
“I see little wiggle room with some European countries, also financially, to make more concessions toward Cyprus,” Frieden said. “What’s difficult is that we are not getting any details from Cyprus, which is why we decided last night that we have to analyse the details and only discuss over the weekend again whether we can back them or not.”In Russia, Finance Minister Michael Sarris said Russia would offer no additional support beyond restructuring a 2.5 billion-euro loan granted in 2011. He met with First Deputy Minister Igor Shuvalov and Finance Minister Anton Siluanov on March 20.
Cyprus in June became the fifth euro-area nation to request a rescue. The action came after Greece’s debt restructuring, the largest in history, trashed the financial health of lenders including Bank of Cyprus Plc and Cyprus Popular Bank.
Cyprus is living “in an illusion,” Michael Meister, deputy parliamentary leader of Merkel’s CDU, told BBC Radio 4’s “Today” program. “They have to restructure the whole economy, restructure the banking sector and until now I don’t see the Cyprus people and politicians agreeing on this.”
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