Cyprus Weighs Big Bank Levy; Bailout Down to Wire

The island’s finance minister, Michael Sarris, reported “significant progress” in talks with international lenders, with the clock running down to an end-Monday deadline.

Cyprus conceded yesterday to a one-time levy on deposits of more than 100,000 euros in a dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse.

The island’s finance minister, Michael Sarris, reported “significant progress” in talks with international lenders, with the clock running down to an end-Monday deadline for Cyprus to clinch a bailout deal with the European Union or lose emergency funding for its stricken banks and risk tumbling out of the euro zone.

His counterparts in Europe’s 17-nation currency union scheduled talks in Brussels for this evening to see if the numbers add up, and the EU’s Economic Affairs Commissioner Olli Rehn said progress was being made toward a solution.

As Cypriot party leaders met, a senior Cypriot official told Reuters that Nicosia had agreed with EU/International Monetary Fund lenders on a 20% levy on amounts over and above 100,000 euros at the Bank of Cyprus, and 4% on deposits over the same level at other banks.

Cypriot President Nicos Anastasiades tweeted: “We are undertaking great efforts. I hope we have a solution soon.” The conservative leader, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 invasion by Turkish forces split the island in two, was due to lead a delegation to Brussels today to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near.

“Hopefully by tomorrow in Brussels we will have the agreement of our partners,” Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters yesterday.

Government officials held talks through the day at the finance ministry with Cyprus’s ‘troika’ of lenders− the EU, European Central Bank and IMF. Angry demonstrators outside chanted “resign, resign!”

Its outsized banking sector crippled by exposure to crisis-hit Greece, Cyprus needs to raise 5.8 billion euros in exchange for a 10 billion euro EU lifeline to keep the country’s economy afloat.

Reuters