Cypriot MPs are due to vote today on a raft of new measures they hope will qualify the country for a bailout package and avoid financial ruin next week. But officials in Brussels and Berlin gave no indication it would be enough.
Cyprus needs to find a way to raise the 5.8 billion euros (£4.9 billion) to qualify for 10 billion euros (£8.5 billion) in rescue loans from other eurozone countries and the International Monetary Fund.
The plan needs approval from eurozone and IMF and that remained elusive. Eurozone officials said they had not seen all the details and would have to discuss whatever final plan Cyprus presents. "The next few hours will determine the future of this country," said government spokesman Christos Stylianides. Cyprus has had to come up with the new plan after MPs rejected a scheme that would have seized up to 10% of people's bank deposits.
The country needs to have the plan in place by Monday, when the European Central Bank has said it will cut off emergency support to the banks. That could trigger their collapse and devastate the economy, potentially pushing the country to leave the 17-country euro currency union.
As part of the package being discussed today, MPs were considering restructuring the country's second largest lender, Laiki, which suffered big losses on Greek debt investments. A large part of deposits in Laiki above the 100,000 euros (£850,000) that are insured could be confiscated. A banking official said seizures of 25-30 % were being discussed.
Banking officials estimate the restructuring will account for 3.6 billion euros (£3 billion) of the 5.8 billion euros the country needs to raise. Laiki bank's acting CEO, Takis Phidias, condemned the plan. "I'm certain that there will be chaos after these bills are approved." Mr Phidias said the initial plan to seize deposits across all Cypriot accounts "would have more evenly shared the burden and certainly, it would have safeguarded both large banks. I'd like to believe that there's still time to carry out this negotiation."
A government official indicated that a tax on deposits in other banks was also still on the table. The Bank of Cyprus, the country's largest lender, said it backed the idea of confiscating some percentage of all bank deposits over 100,000 euros because there were no immediate alternatives.
Meanwhile, Cypriot efforts to clinch a contribution from Russia appeared to have failed for now. Russia is a key player in the crisis as Russian depositors have parked around 20 billion euros (£17 billion) in the country. "We will only be ready to discuss various ways of support for that state only after the EU nations and Cyprus work out a final settlement," Russian Prime Minister Dmitri Medvedev told a news conference.
Back in Nicosia, worried Laiki employees gathered near parliament for a second day to protest at the bank's restructuring, which would break the lender in two. One side would take on the soured investments to allow the stronger side to survive. "The bank is finished, we'll lose our jobs and I'm worried about my kids," Laiki employee Nikos Tsiangos said, standing behind barricades and a cordon of police that have blocked the way to Parliament.
The bills MPs were considering also included setting up an "Investment Solidarity Fund" to receive donations from the church and to pool revenue from other measures. They were also due to vote on restricting banking transactions in times of crisis.
