Cyprus racing to complete alternative rescue plan

[March 23, 2013]  NICOSIA, Cyprus (AP) -- Politicians in Cyprus were racing Saturday to complete an alternative plan raising funds necessary for the country to qualify for an international bailout, with a potential bankruptcy just three days away.

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) in order to secure 10 billion euros in rescue loans from other European countries that use the single currency, and from the International Monetary Fund. The country's lawmakers soundly rejected an unpopular initial plan that would have seized up to 10 percent of people's bank accounts, and is now seeking a way to raise the desperately needed money.

Finance Minister Michalis Sarris said it was unclear when new legislation raising funds would be completed and put to a vote in Parliament, but that it could be as early as Saturday night.

Nicosia made a significant step towards cementing a new plan Friday night, when its lawmakers approved nine bills, including three crucial ones that will restructure ailing banks, restrict financial transactions in emergencies and set up a "solidarity fund" for contributions.

Time is running out fast. The European Central Bank has said it will stop providing emergency funding to Cyprus' banks after Monday if no new plan is in place. Without ECB's support, Cypriot banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-nation eurozone.

Representatives of the IMF, ECB and European Commission -- collectively known as the troika -- were meeting with officials in the Finance Ministry throughout the morning, negotiating several new laws, including a crucial bill that would impose some form of a tax on bank deposits. The percentages and where the tax would apply are unclear, but the deputy head of the DISY governing party, Averof Neophytou, said in Parliament Friday it could be less than 1 percent on all deposits.

Troika consent is essential as they will determine whether the plan that the Cypriots come up with would meet the requirements for the bailout before it is presented to the eurozone finance ministers for final approval.

A eurogroup meeting of the finance ministers is expected to be held in Brussels over the weekend, and Cyprus President Nicos Anastasiades was also to fly there, potentially as early as Saturday.

[Associated Press]

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.