The Washington Post

Cyprus has a new plan to secure a bailout, officials say


At the entrance of a closed Laiki Bank graffiti sprayed on the pavement reads in Greek “thieves” as man walks in capital Nicosia, Cyprus, Wednesday, March 20, 2013. Cypriot officials rushed Wednesday to find new ways to stave off financial ruin, including asking Russia for help, after Parliament rejected a plan to contribute to the nation’s bailout package by seizing people’s bank savings. (Petros Giannakouris/AP )

Searching for a way out of a crippling financial crisis, officials in Cyprus on Wednesday pursued a new bailout strategy that could include a loan from Russia in exchange for natural gas leases and selling off assets from its most troubled banks.

Cyprus needs to come up with $7.5 billion on its own to secure $13 billion in rescue loans from international creditors. But the country’s first plan — to seize up to 10 percent of people’s bank accounts — failed miserably. Now officials are trying to limit the amount of money they need to take from customers’ deposits.

The new “Plan B” could get a vote as early as Thursday, three top government officials said.

The latest move came a day after lawmakers voted overwhelmingly against the earlier plan — a rejection that threw Cyprus’s bailout into question. That raised the possibility that the country’s banks could collapse, the government could be unable to pay its bills and Cyprus could be forced out of the euro zone.

That could roil global financial markets as well as endanger deposits in the country even further.

The new plan was described by three top government officials, who spoke on the condition of anonymity because details of the proposal were not being released until party officials had a chance to review them at a meeting Thursday morning.

The package includes a proposal to restructure Cyprus’s heavily indebted second-largest lender, Laiki. The idea would be to isolate the bank’s bad assets, which would be taken over by the government, from its good assets, which could be sold to raise money. That strategy could also be applied to the country’s biggest lender, Bank of Cyprus.

To avoid bank runs and give officials time to push the package through, the country’s banks, which have been shuttered since Saturday, will remain closed for the rest of the week, said the central bank spokeswoman, Aliki Stylianou. Monday is a bank holiday, so banks will not reopen before Tuesday.

Finance Minister Michalis Sarris was in Moscow on Wednesday to discuss a range of aid options with the longtime ally, and he vowed to remain there until he secured a pledge of support. “We will be here until some kind of agreement is reached,” Sarris said.

Russians are believed to hold nearly a third of the total amount of deposits in Cyprus’s banks. The idea that authorities could dip directly into people’s bank accounts had outraged Cypriots and Russians alike.

A Cypriot government official said the new proposal still includes a tax on deposits, but at a percentage far lower than that originally proposed. The official said the E.U. had given Cyprus until Monday to come up with an alternative, so speed was of the essence.

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