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EU threatens cut-off as Cyprus scrambles to avert meltdown

Reuters  Nicosia/Frankfurt, March 21, 2013
First Published: 22:53 IST(21/3/2013) | Last Updated: 02:26 IST(22/3/2013)

The European Central Bank (ECB) gave Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its banks and inevitable collapse.


The ultimatum came with the island’s leaders locked in talks on a “Plan B” to try to raise €5.8 billion demanded by the European Union under a €10 billion ($13 billion) rescue, after angry lawmakers threw out a tax on deposits as “bank robbery”.

Officials said new options discussed could include nationalising pension funds of semi-state companies, issuing an emergency bond linked to future natural gas revenue or a revised bank deposit levy hitting only large investors, many of them Russians.

Meanwhile, politicians Thursday agreed to set up an investment fund to secure a bailout deal with eurozone lenders.

The ECB, which has kept Cyprus’ banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off. Cyprus ordered banks to stay closed until Tuesday. Stock exchange also suspended trading for the rest of the week.

In Moscow, Cypriot finance minister Michael Sarris said he was discussing possible Russian investments in the island’s banks and energy resources, as well as an extension of an existing €2.5-billion Russian loan.

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