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Posts tagged ‘European Central Bank’

Leftist German Protesters Clash with Police.

FRANKFURT, Germany  — German police used pepper spray and batons against thousands of anti-capitalist demonstrators from the Blockupy movement on Saturday during a second day of protests in Frankfurt against Europe’s austerity policies.

Planned rallies in struggling euro zone members Spain and Portugal drew fewer people than expected, but in Germany‘s financial capital around 7,000 protesters marched with signs reading “Make love, not war” and “IMF – get out of Greece”.

The protest was initially peaceful but small groups of masked protesters then hurled stones and smoke bombs at the police who responded with force.

Several protesters and police officers were hurt before the action died down later in the evening. Police at the scene said several arrests had been made, but could not say how many.

A first day of protests on Friday in Frankfurt succeeded in paralyzing some of the city’s financial institutions, cutting off access to the ECB’s iconic tower office building and Deutsche Bank’s headquarters.

Police angered marchers on Saturday by halting them before they could pass close to the ECB building after protesters let off firecrackers.

In a statement, Blockupy accused the police of wanting to “escalate” tensions and of blocking a legitimate protest.

“This is scandalous,” spokeswoman Ani Diesselmann said. “The (original) route was approved by several legal institutions.”

Police said officers had been repeatedly attacked by the small group of demonstrators, making it necessary for them to use force and pepper spray.

Protests against the “troika” of international lenders that has bailed out struggling euro zone states — the International Monetary Fund, the European Central Bank (ECB) and the European Union – were planned in several countries on Saturday.

Reuters witnesses said several thousand Spaniards gathered at the peak of Saturday’s protest in central Madrid, but this was fewer than similar events had attracted in the recent past.

One thousand or fewer took to the streets in Lisbon, while only a few dozen rallied in austerity-weary Athens, where attendance at protests has dwindled in the absence of much noticeable impact on policy.

A march in the southern French city of Toulouse attracted 3,000 people, according to police.

Former leftist presidential candidate Jean-Pierre Melenchon told French television the protests across Europe proved people had a “a European consciousness, a political consciousness.”

Europe’s Blockupy movement was formed after the Occupy Wall Street movement in 2011. They blame the budget cuts and labor market reforms supported by the ECB, the IMF and European financial and political leaders for driving the continent into a recession that has left more than a quarter of Greeks and Spaniards out of work and millions of Europe’s poor worse off.

“This is a good opportunity (to protest). Youth unemployment is so important right now,” said Antonia Proka, 25, a Greek who now lives in the Netherlands.

“I have lots of German friends who don’t find jobs so the problems are the same, we are on the same side,” she said.

While more than half of Spaniards and Greeks under the age of 25 are unemployed, only 8 percent of Germans and Austrians from the same age group are out of work.

Governments struggling with large debt burdens have cut spending and raised taxes, deepening recession across the euro zone, while many families are deep in debt or have lost their homes after property bubbles burst.

Germany’s own economy has been fairly resilient to the crisis and many in Europe’s struggling southern states blame Chancellor Angela Merkel for enforcing the painful policies in exchange for EU funds which largely come from Germany.

As well as the ECB, on Friday the Blockupy demonstrators targeted several large commercial banks, stores and Frankfurt airport.

© 2013 Thomson/Reuters. All rights reserved.

OECD: Europe Remains Threat to World Economy.

The recession in Europe risks threatening the world’s economic recovery, a leading international body warned Wednesday.

In its half-yearly update, the Organization for Economic Cooperation and Development said that protracted economic weakness in Europe “could evolve into stagnation with negative implications for the global economy.”

The OECD again slashed its forecast for the 17 European Union countries that use the euro, saying it will shrink by 0.6 percent this year, after 0.5 percent drop in 2012. The OECD had predicted a 0.1 percent decline for the eurozone in its report six months ago — and this time last year, it forecast growth of nearly 1 percent for 2013.

The U.S. economy will continue to outpace Europe, the OECD said, with growth of 1.9 percent in 2013 and 2.8 percent in 2014. For global gross domestic product, the OECD forecasts an increase of 3.1 per cent for this year and by 4 percent for 2014.

Noting that eurozone policymakers have “often been behind the curve,” the OECD warned that Europe was still beset by “weakly capitalized banks, public debt financing requirements and exit risks.”

Meanwhile, the eurozone’s 12.1 percent unemployment “is likely to continue to rise further … stabilizing at a very high level only in 2014,” the OECD said.

The OECD report predicts unemployment will reach 28 percent in Spain next year and 28.4 percent in Greece.

The eurozone economy shrank 0.2 percent in the January-March period, the sixth consecutive quarterly decline, making it the eurozone’s longest ever recession.

Austerity measures have inflicted severe economic pain and sparked social unrest across the continent. Europe’s young people are especially suffering, with unemployment of around 50 percent in some of the hardest-hit eurozone countries such as Spain and Greece.

But OECD Secretary-General Angel Gurria also noted that the tough reforms that those countries — to loosen their labor markets and make their public administrations more efficient — will soon bear fruit.

“In the periphery in particular, which was hardest hit by the crisis, that is where the reforms are taking place at the faster pace and where things eventually are, I believe, going to be looking better faster once we go through the acute stage of the crisis,” Gurria told reporters.

With a population of more than half a billion people, the EU is the world’s largest export market. If it remains stuck in reverse, companies in the U.S. and Asia will be hit.

Last month, U.S.-based Ford Motor Co. lost $462 million in Europe and called the outlook there “uncertain.”

Other major economies have faltered this year but none are in recession, like Europe. The U.S. economy grew 2.2 percent last year and China, the world’s No. 2 economy, is growing around 8 percent a year.

The OECD urged Europe to bolster its efforts to support economic recovery. While the European Central Bank‘s loose monetary policy has helped, “more can be done through further non-conventional measures” and the establishment of a Europe-wide banking union, the organization said.

In the U.S., the organization urged politicians to soften automatic across-the-board budget spending cuts to make them less harmful to growth, and said “a credible long-term fiscal plan needs to be put in place.”

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

Growth in Sight for Eurozone Economy, but No Big Upturn, Reuters Poll Finds.

Growth will return to the eurozone‘s recession-mired economy in the second half of this year, but economists see no chance it will recover strongly until at least 2015, a Reuters poll showed on Tuesday.

The eurozone has been stuck in recession since the end of 2011 and data on Wednesday is expected to show the economy shrank again between January and March, by 0.1 percent.

However, the latest poll of 65 economists, taken this week, suggested that should be the end of its declining streak.

The economy is expected to stagnate in the current quarter, before eking out 0.2 percent growth for the next few quarters thereafter.

But with austerity and rising unemployment still taking its toll across the continent, few foresaw any prospect of growth picking up much before 2015 – especially with such deep divisions running between the eurozone’s constituent countries.

“Prospects for the euro area are bleak,” said Tatiana Fic, senior research fellow at Britain’s National Institute of Economic and Social Research.

“Growth divergences persist among euro area members. Further contractions in 2013 are projected for Greece, Italy, Portugal and Spain, while modest positive growth rates are projected for Austria, Belgium, Ireland and Germany.”

Although business surveys suggested German companies fared badly last month, data on Tuesday showed investor morale in Europe’s largest economy pointed to a timid recovery, which would help lift the wider eurozone.

However, austerity and tight credit conditions elsewhere will remain a drag.

“This is particularly true of the southern periphery eurozone countries, and we expected extended contraction in both Italy and Spain to weigh down appreciably on overall eurozone GDP in 2013,” said Howard Archer, chief UK and European economist at IHS Global Insight.

For those reasons, speculation has persisted about what else the European Central Bank might do to spur growth after it cut its main rate to a new record low 0.5 percent this month.

Some policymakers have talked openly of cutting the deposit rate below its current level of zero percent, which would mean charging banks to hold money overnight at the ECB – in theory persuading them to lend it instead.

Still, a majority of economists and traders polled in the past week think such a move is unlikely.

Whatever action the ECB decides to take, high inflation will not prove to be an obstacle. Inflation should remain comfortably below the ECB’s target ceiling of close to 2 percent until at least 2015, the poll showed.

Only five out of 40 economists thought inflation would exceed 2 percent in any quarter until the end of next year.

© 2013 Thomson/Reuters. All rights reserved.

Cyprus Reaches Last-minute Deal on $10B Euro Bailout.

Cyprus reached a last-ditch deal with international lenders on a 10 billion euro ($13 billion) rescue plan to avoid economic meltdown, agreeing to close down its second-largest bank and inflict heavy losses on big depositors.

The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund.

Without a deal, Cyprus’s banking system would have collapsed and the country could have become the first to crash out of the European single currency.

Backed by euro zone finance ministers, the plan will spare the Mediterranean island a financial catastrophe by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank”.

Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalise Bank of Cyprus, the island’s biggest, through a deposit/equity conversion.

The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said.

Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution.

An EU spokesman said no across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits.

The Central Bank of Cyprus said both Bank of Cyprus and Laiki would remain shut until Thursday, while all other lenders would reopen on Tuesday, just over a week after the government ordered them to close their doors to halt a run on deposits.

The government is expected to impose restrictions on capital movement to halt a flood of money from the island, but details were not yet known.



Cyprus government spokesman Christos Stylianides said: “We averted a disorderly bankruptcy which would have led to an exit of Cyprus from the euro zone with unforeseeable consequences.”

Asked about the level of losses on uninsured depositors in Bank of Cyprus, he told state radio: “The assessment is that it will be under or around 30 percent.”

The Cyprus central bank said the agreement had also avoided the disorderly default of Laiki Bank.

Russia signalled it would back the bailout even though it would impose big losses on Russian depositors, who have billions in Cyprus banks.

President Vladimir Putin ordered officials to restructure a loan Moscow granted to Cyprus in 2011 – having rejected Nicosia’s request for easier terms in crisis talks last week.

Prime Minister Dmitry Medvedev – who ranks below Putin – earlier criticised the bailout, voiced the anger expressed by Russian depositors, saying: “The stealing of what has already been stolen continues.”

Among Cypriots, there was a mood of wariness about the deal.

“How long will it last?” asked Georgia Xenophontos, 23, a hotel receptionist in Nicosia. “Why should anyone believe anything this government says?”

But many in the capital appeared intent on enjoying a sunny holiday morning, drinking coffee at pavement cafes and watching camera crews filming people drawing money from bank machines.

German Chancellor Angela Merkel said the deal was right for Cyprus because it ensured that those who contributed to the crisis were required to pay towards its resolution.

“I am very pleased that a solution was found last night and that we have been able to avoid an insolvency,” Merkel said.

Anastasiades was due to make a live televised statement at 7 p.m (1700 GMT), on his return to Cyprus from Brussels, but the appearance was delayed.

Lefteris Christoforou, vice-chairman of the ruling Democratic Rally party, said it was important that Cyprus had avoided a chaotic bankruptcy. “It is a bad deal, but the extreme scenario we had to contend with was worse.”



A senior source in the Brussels talks said Anastasiades threatened to resign at one stage on Sunday if pushed too far.

The Conservative leader, barely a month in office and wrestling with Cyprus’s worst crisis since a 1974 invasion by Turkish forces split the island in two, was forced to abandon his efforts to shield big account holders.

Diplomats said the president had fought hard to preserve the country’s business model as an offshore financial centre drawing huge sums from wealthy Russians and Britons but had lost.

The EU and IMF required that Cyprus raise 5.8 billion euros from its banks towards its own rescue in return for 10 billion euros in international loans. The head of the EU rescue fund said Cyprus should receive the first emergency funds in May.

IMF chief Christine Lagarde said the agreement was “a comprehensive and credible plan” that addresses the core problem of the banking system.

“This agreement provides the basis for restoring trust in the banking system, which is key to supporting growth,” she said in a statement.

With banks closed for the last week, the Central Bank of Cyprus imposed a 100-euro daily limit on withdrawals from cash machines at the two biggest banks to avert a run.

The euro gained against the dollar on the news in early Asian trading.

Analysts had said failure to clinch a deal could have caused a financial market sell-off, but some said the island’s small size – it accounts for just 0.2 percent of the euro zone’s economic output – would have limited contagion.

Cyprus’s banking sector, with assets eight times the size of the economy, has been crippled by exposure to Greece, where private bondholders suffered a 75 percent “haircut” last year.

Without a deal by the end of Monday, the ECB said it would have cut off emergency funds to the banks, spelling certain collapse and potentially pushing the country out of the euro.

Under the bailout agreement, Laiki’s ECB funds will pass to Bank of Cyprus, and the central bank will “provide liquidity to BoC in line with applicable rules”.

The tottering banks held 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros – enormous sums for an island of 1.1 million people that could never sustain such a big financial system on its own. ($1=0.7694 euros)

© 2013 Thomson/Reuters. All rights reserved.


Cyprus Faces Last Ditch Chance to Save Economy.

Cypriot President Nicos Anastasiades, seeking a last-minute reprieve from financial meltdown at talks in Brussels on Sunday, has a “very difficult task” ahead of him if he is to save the island’s economy, a government spokesman said.

With Cyprus facing a Monday deadline to avert a collapse of its banking system and potential exit from the euro, late night talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up without result.

Anastasiades then headed to Brussels in a private jet sent by the European Commission to continue the talks ahead of a crunch meeting of eurozone finance ministers.

The president and his team have a “very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord,” the spokesman said.

Underlining the gravity of Cyprus’ position, the EU’s economic affairs chief said there were now “only hard choices left” for the latest casualty of the eurozone crisis.

After negotiations ended in the early hours of Sunday morning, the government issuing a statement saying talks were at “a very delicate phase” and deadlines were very tight.

The Cyprus government’s tone jarred with earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from the island’s “troika” of international lenders, the EU, IMF and European Central Bank.

Cyprus’ overgrown banking sector has been crippled by exposure to crisis-hit Greece, and the EU says the east Mediterranean island must raise 5.8 billion euros on its own before it can receive a 10 billion euro bailout.

Without a deal on Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the eurozone.

Conservative leader Anastasiades, barely a month in the job and wrestling with Cyprus’ worst crisis since a 1974 invasion by Turkish forces split the island in two, is expected to meet the heads of the EU, the European Central Bank and IMF in Brussels.

Scrambling to find the funds, officials said Cyprus had conceded to a one-time levy on bank deposits over 100,000 euros, a dramatic U-turn from five days ago when lawmakers angrily threw out a similar proposal as “bank robbery.”

A senior Cypriot official said Nicosia had agreed with its lenders on a 20 percent levy over and above 100,000 euros at the island’s largest lender, Bank of Cyprus, and four percent on deposits above the same level at other troubled banks.


Finance Minister Michael Sarris spoke of “significant progress” in talks on Saturday, as angry demonstrators outside the finance ministry chanted “resign, resign!”

The EU’s Economic Affairs Commissioner, Olli Rehn, said progress was being made, but warned of tough times ahead.

“Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available,” he said on Saturday. “Today, there are only hard choices left.”

In a stunning vote on Tuesday, Cyprus’s 56-seat parliament rejected a levy on depositors, big and small, and Sarris spent three fruitless days in Moscow trying to win help from Russia, whose citizens have billions of euros at stake in Cypriot banks.

Rebuffed by the Kremlin, Sarris said the levy was back “on the table”.

On Friday, lawmakers voted in late-night session to nationalize pension funds and split failing lenders into good and bad banks – a measure likely to be applied to the second-biggest lender, the largely state-owned Cyprus Popular Bank, also known as Laiki.

Cypriot media reports suggested talks were stuck on a demand by the IMF that Bank of Cyprus absorb the good assets of Popular Bank and take on its nine billion euros debt to the central bank as well.

The reports said the Cypriot government was resisting.

A Cypriot plan to tap pension funds had already been shelved, a senior Cypriot official told Reuters, under opposition from Germany, which had warned the measure might be even more painful for ordinary Cypriots than a deposit levy.

It was also far from certain that a majority of lawmakers would back a revised levy, or whether the government might even try to bypass the assembly.

Ordinary Cypriots have been outraged by the levy and stunned at the pace of the unfolding drama. They elected Anastasiades in February on a mandate to secure a bailout and save banks whose capital was wiped out by investments in Greece, the epicenter of the eurozone debt crisis.


For the past week they have been besieging cash machines ever since bank doors were closed on the orders of the government to avert a massive capital flight. Anticipating a run on banks when they reopen on Tuesday, parliament has given the government powers to impose capital controls.

On Saturday, some 1,500 protesters, many of them bank workers, marched on the presidency, holding banners that read, “No to the bankruptcy of Cyprus” and “Hands off workers’ welfare funds”.

The levy on bank deposits represents an unprecedented step in Europe’s handling of a debt crisis that has spread from Greece, to Ireland, Portugal, Spain and Italy.

Cypriot leaders had initially tried to spread the pain between big holdings and smaller depositors, fearing the damage it would inflict on the country as an offshore financial haven for wealthy foreigners, many of them Russians and Britons.

The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros – enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.

© 2013 Thomson/Reuters. All rights reserved.


Cyprus Close to Bailout Deal.

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 from the deputy leader came after Moscow had rebuffed requests from Nicosia for assistance to save Cypriot banks in which Russians have billions of euros at risk.

He gave little detail beyond saying Cyprus was 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.

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“There is cautious optimism that in the next few hours we may be able to reach an agreed platform so parliament can approve these specific measures which will be consistent with the approach, the framework and the targets agreed at the last Eurogroup,” Averof Neophytou, deputy leader of President Nicos Anastasiades‘s Democratic Rally, told reporters in the capital.

Germany warned Cyprus it was “playing with fire” but also kept up pressure by saying the euro zone was well able to contain any crisis – sticking to a threat to cut Cyprus off.

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 programme is agreed, Cyprus took a first step toward financial consolidation by arranging for the takeover of big Greek units of its banks by a Greek competitor.

Shares in Piraeus Bank in Athens shot up 20 percent before officials confirmed Piraeus would take control of the Greek units of Bank of Cyprus and Cyprus Popular Bank, two big retail lenders badly burned by exposure to Greece’s own troubles.

Euro zone leaders, led by Germany, have offered Cyprus 10 billion euros ($13 billion) on condition it raises 5.8 billion of its own. A plan to fund that by taxing deposits – breaking what had hitherto been a taboo in efforts to stabilise the currency bloc – had led to parliament throwing out the deal.

EU officials criticised Cyprus for insisting on taxing even small savers whose deposits up to 100,000 euros benefit from a state guarantee – a measure Cypriot leaders favoured in order to limit the losses for bigger depositors, many of them Russian and seen as vital to the future viability of the Cypriot economy.



Hopes of favour from Moscow were disappointed on Friday.

Cypriot Finance Minister Michael Sarris left for home after failing to renegotiate a 2.5-billion euro loan from the Russian government, win new financing or lure Russian investors to Cyprus’s banks and gas reserves.

The Bank of Cyprus urged the government to go back and make a deal with the EU, under which larger deposits over 100,000 euros, would be taxed. It was preferable, it said, to a collapse of the system and a return to the Cypriot pound which would wipe out assets. “There must be no further delay,” the bank said.

EU leaders, notably Germans who face an election in six months, have been reluctant to give up on the bank levy since it protects them from accusations of using European taxpayers money to bail out big Russian investors in Cyprus.

While this had raised concern that it might erode confidence in banks in other, bigger euro zone states, notably Spain and Italy, the leaders of the euro zone have made clear they believe they can contain any damage, even it Cyprus is forced into a bankruptcy that would lead to it abandoning the euro.

German Finance Minister Wolfgang Schaeuble said on Friday that muted reactions to the crisis in financial markets showed the euro zone was able to contain the Cyprus problem.

On the island, lawmakers and banking officials were locked in talks inside parliament. Hundreds of angry Cypriots faced off with riot police outside.

On the table are proposals to nationalise pension funds, pool state assets and split Popular Bank in a desperate effort to satisfy exasperated European allies.

There were persistent rumours of a possible U-turn on the bank levy, targeting only big depositors with over 100,000 in Cypriot banks, many of them foreigners including Russians.



Everything is subject to the approval of Cyprus’s lenders at the EU, ECB and International Monetary Fund.

The head of the Eurogroup of euro zone ministers, Dutchman Jeroen Dijsselbloem, said it was focused on keeping Cyprus in the euro zone. Asked whether Cyprus’s exit from the euro zone was inevitable, he did not rule it out, however:

“All kinds of scenarios are possible and the scenarios we’re focusing on are to come to a joint solution in which Cyprus is saved but in which the banking sector continues in a smaller but healthier form.”

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Germany had rejected a proposal to nationalise pension funds and demanded Cyprus take an axe to its banks.

Chancellor Angela Merkel told lawmakers that while she wanted to keep Cyprus in the euro zone, the country must first recognise it had no future as an offshore financial centre for wealthy Russians and Britons, two parliamentarians told Reuters.

Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout.

Depositors, who have been besieging bank cash machines all week, queued again on Friday to withdraw what they could.

“Our so-called friends and partners sold us out,” said Marios Panayides, 65, a protester at the parliament. “They have completely abandoned us on the edge of an abyss.”



© 2013 Thomson/Reuters. All rights reserved.

Russia Rejects Cyprus Financial Rescue Bid as Deadline Looms.

Russia spurned Cyprus’s offers of assets for a bailout as the island nation’s lawmakers begin debate on legislation to avert a financial collapse.

“I think we aren’t able to get the support that we wanted to get,” Cypriot Finance Minister Michael Sarris said in an interview after checking out of the Lotte Hotel in Moscow. “But we must go back home because things are getting serious.”

Cypriot lawmakers begin debating legislation today to prevent a financial meltdown as the European Central Bank threatens to cut off a lifeline for the country’s banks in three days unless a bailout agreement with the European Union is reached. Russian companies and individuals may have about $31 billion of deposits in Cyprus, which in turn is the biggest source of foreign direct investment in Russia.

“The only thing that Cyprus could hope for is Gazprom buying some reserves from them,” Vladimir Kolychev, head of research at Societe Generale SA’s Rosbank unit in Moscow, said by phone. “It’s not clear what these gas reserves are worth, and apparently Gazprom wasn’t particularly interested.”

Russia has ended talks with Cyprus and will decide on participating in restructuring debt after the so-called troika overseeing euro-area bailouts makes its decision, Finance Minister Anton Siluanov told reporters today. The troika comprises officials from the European Commission, ECB and International Monetary Fund.

Door Open

“We didn’t close the door, didn’t say we won’t discuss anything,” Prime Minister Dmitry Medvedev said today at a briefing in the Russian capital with Jose Barroso, head of the European Commission. While “we are prepared to discuss various options for supporting” Cyprus, Russia’s possible assistance is contingent on a consensus over a rescue plan between the nation and the EU, he said.

A solution to the crisis “can be found” and it must be acceptable to all members of the currency union, Barroso said. “I believe there is no time to lose,” he said.

Sarris met with First Deputy Minister Igor Shuvalov and Siluanov on March 20, asking Russia to restructure a 2.5 billion-euro ($3.2 billion) loan that was granted in December 2011 by extending its duration beyond 2016 and lowering the rate. The Mediterranean island nation is seeking to overcome a deadlock after lawmakers rejected an unprecedented 5.8 billion- euro levy on bank deposits that the Eurogroup proposed.

‘Not Ready’

“I think the loan will be extended and the conditions adjusted,” Sarris said. “But the rest of the support, we are not ready to have concluded anything.”

A new loan to Cyprus wasn’t considered because it would have exceeded a European debt limit, Siluanov said. Cyprus had asked Russia for about 5 billion euros, three Russian government officials said yesterday, asking not to be identified because the talks were private.

The euro-area nation sought to attract Russian capital into a proposed investment fund that would include gas, banking and other assets, intended to help raise the 5.8 billion euros needed to trigger emergency loans, Siluanov said. “Investors didn’t show interest,” he said.

OAO Rosneft and OAO Gazprom, Russia’s state-run oil and gas producers, received an offer only to participate in tenders for Cypriot offshore assets and weren’t interested, a Russian government official said today. State-run OAO Sberbank and VTB Group, Russia’s two largest lenders, said they didn’t plan to buy assets in Cyprus.

Cypriot Commitment

Sarris said March 20 that talks would last “as long as it takes,” while his hotel room had been booked until March 25, according to hotel reception.

The euro appreciated 0.2 percent to $1.2929 at 1:52 p.m. in Moscow. Russia’s Micex Index declined 0.8 percent to 1,448.11, while the ruble was little changed at 34.9767 against the central bank’s target dollar-euro currency basket.

Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s Investors Service. Including loans to companies registered in Cyprus, Russia’s

© Copyright 2013 Bloomberg News. All rights reserved.

Cyprus on Verge of Financial Collapse.

The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.

In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to impose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week’s shutdown.

Parliament will reconvene later on Friday to debate a raft of government crisis measures after lawmakers adjourned a late-Thursday sitting saying they needed more time for consultation.

Even those measures looked likely to fall short of a promised “Plan B” to raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro lifeline from the EU and IMF.

The European Central Bank said it would cut off liquidity to Cypriot banks without a deal, and a senior EU official told Reuters the bloc was ready to see the island banished from the euro to contain damage to the wider European economy.

Angry Cypriot lawmakers on Tuesday threw out a tax on deposits, calling the EU-backed proposal “bank robbery.”

After more talks on Thursday, the currency union’s finance ministers urged Cyprus to table a new proposal.

Trying to placate its lenders, the government proposed to parliament a “solidarity fund” that would bundle state assets, including future gas revenues, as the basis for an emergency bond issue, likened by JP Morgan to “a national fire sale.”

It also sought the power to impose capital controls on banks, a type of measure unseen since before the country joined the single currency bloc five years ago.

The European Central Bank, which has kept Cyprus’s banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks,” the ECB said.

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus’s biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.

“If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency,” the EU official said.

Cypriot banks, crippled by their exposure to Greece, the center of the euro zone debt crisis, have been closed all week and are not due to reopen until Tuesday.

Long lines formed on Thursday at ATMs still dispensing cash, and there were angry scenes outside parliament where several hundred protesters, many of them bank employees, rallied after rumours the second-largest lender, Cyprus Popular Bank , was to be wound up.

Chanting “Hands off the bank,” several demonstrators fought with riot police.

“We have children studying abroad, and next month we need to send them money,” protester Stalou Christodoulido said through tears. “We’ll lose what money we had and saved for so many years if the bank goes down.”

The central bank said it was readying measures to keep Popular Bank afloat. Some banking officials said it could be split between good and bad assets.

Under the levy rejected by parliament, EU lenders, notably Germany, had wanted uninsured bank depositors to bear some of the cost of recapitalising the banks, but Cyprus feared for its future reputation as an offshore banking haven and planned to spread the burden also to small savers whose deposits under 100,000 were covered by state insurance. Lawmakers threw it out.

In Moscow since Tuesday, Cypriot Finance Minister Michael Sarris said he was discussing possible Russian investments in banks and energy resources, as well as an extension of an existing 2.5-billion-euro Russian loan.

He said Cyprus had no plans to borrow more money from Russia and add to its debt mountain. The Russian Finance Ministry had said on Monday that Nicosia sought an extra 5-billion-euro loan.

The chairman of the euro group of finance ministers, Dutchman Joreon Dijsselbloem, told the European Parliament in Brussels that Moscow informed the EU it had no intention of ploughing more money into Cyprus.

Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were “in a mess” and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.

Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island’s predicament.

© 2013 Thomson/Reuters. All rights reserved.

Cyprus Bank Limits Cash Withdrawals Amid Crisis.

  • Cyprus Bank Limits Cash Withdrawals Amid CrisisView PhotoCyprus Bank Limits Cash Withdrawals Amid Crisis

Cyprus’ second largest bank has stopped customers withdrawing more than 260 euros (£221) a day from cash machines, as MPs try to reach a deal to save the country’s economy.

The announcement came as the central bank said it had proposed a restructuring of the heavily indebted banking sector, including measures to prevent the Popular Bank, or Laika, going bankrupt.

“This consolidation process will prevent the risk of bank failures and protect in their entirety all insured deposits up to the amount of 100,000 euros ($129,000),” central bank governor Panicos Demetriades said.

“It also creates conditions for the recovery of the banking system and guarantees jobs.”

Earlier, as long queues formed as cash machines at Popular Bank branches across the island, the central bank was forced to deny rumours it was to be closed down.

Banks in Cyprus closed their doors last Friday and will remain shut until next Tuesday amid fears that the country’s financial crisis could prompt a run on the banks.

However, many customers have begun to fear that the troubled Popular Bank will never re-open.

“I’ve been to five ATMs, looking for the one with the smallest queue. The others had really long queues, at least 40 or 50 people,” Peter Larkin, a Nicosia resident waiting in line with his five-year-old daughter, said.

“There’s a lot of rumours that Laiki is going to go bankrupt and that (their ATMs) will stop giving out money.”

The Popular Bank said it was the high demand for cash that had forced them to reduce the amount customers could take out from 700 euros.

The bank’s employees staged an angry protest outside parliament amid the uncertainty, at one point breaking through a police cordon around the building.

Sky’s Ashish Joshi, reporting from outside parliament, said: “They are afraid about losing their jobs.

“The word has got out that the banks might be sacrificed in some shape or form for Cyprus to come up with its obligation.”

The island’s banking sector could face collapse if a new bailout bill is not agreed, following parliament’s rejection of a one containing a levy on all bank accounts in the country.

Parliament was due to vote on Thursday evening on a ‘Plan B’ to raise the 5.8bn euros (£4.9bn) Cyprus needs to contribute if it is to get the 10bn euros (£8.5bn) from eurozone partners and the IMF.

Earlier, party leaders agreed to set up an “Investment Solidarity Fund” to gather contributions from ordinary Cypriots, businessmen and foreign investors in a an attempt to raise the cash.

The country’s largest bank, the Bank of Cyprus, has appealed for MPs to pass a bailout deal.

“The Cyprus economy is on the brink and in a fragile state. The next move may prove its salvation or destruction,” the bank said in a statement.

The European Central Bank (ECB) has said it will only guarantee assistance until Monday night without a new aid programme being in place.

:: Greek Cypriot-born entrepreneur Theo Paphitis will be among the guests on Jeff Randall Live, at 7pm on Sky News.


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