NICOSIA, (Reuters) – Cyprus considered nationalising pension funds and ordered banks to stay shut till next week to avert financial chaos after it rejected the terms of a European Union bailout and turned to Russia for aid.
Crisis talks among the political leadership in Nicosia are set to resume today after late-night meetings to discuss a “Plan B” broke up on Wednesday without result.
EU officials voiced frustration but little sympathy for an ambitious but now bust banking system that extended itself well beyond the island; Russia, whose citizens have billions to lose in those Cypriot banks, called the EU a “bull in a china shop”.
President Nicos Anastasiades, just a month in office and wrestling with his country’s worst crisis since the Turkish invasion of 1974 that divided Greek- and Turkish-speaking Cypriots, is due to meet party leaders at 9:30 a.m. (0730 GMT).
The deputy leader of his Democratic Rally warned time was running out: “We don’t have days or weeks, we have only hours to save our country,” Averos Neophytou told reporters.
Banks, shut since the weekend, are to stay closed for the rest of the week and so not reopen till Tuesday after a holiday weekend, a government official told Reuters, extending the misery of Cypriot businesses already feeling the pinch.
Without a resolution, the fate of the small nation of just 1.1 million has shaken confidence in the single-currency euro zone and raised geopolitical tension between the EU and Russia.
Finance Minister Michael Sarris extended a stay in Moscow, where Russian officials said he asked for a further 5 billion euros on top of a five-year extension and lower interest on an existing 2.5-billion euro loan from Moscow.
In a vote on Tuesday, the island’s tiny legislature threw out a proposed tax on bank deposits in exchange for a 10-billion euro bailout from the EU, a stunning rejection of the kind of strict austerity accepted over the past three years by crisis-hit Greece, Portugal, Ireland, Spain and Italy.
Russian Prime Minister Dmitry Medvedev, who was preparing to meet an EU Commission delegation in Moscow on Thursday, said the bloc had behaved “like a bull in a china shop” and likened its proposals, which would force Russian customers to contribute to the rescue of Cypriot banks, to Soviet-era confiscations. But the European Central Bank kept the pressure on, warning that it would have to pull the plug on Cyprus unless the country, one of the smallest of the 17 members of the euro zone, took a bailout quickly.
Despite the looming threat of default and a banking collapse, Cypriots on Tuesday balked at EU demands for a levy on bank deposits to raise 5.8 billion euros, once taboo in Europe’s handling of the stubborn debt crisis.
