Statement by the Eurogroup President on Cyprus - The Eurogroup held a teleconference this evening to take stock of the situation in Cyprus. I recall that the political agreement reached on 16 March on the cornerstones of the adjustment programme and the financing envelope for Cyprus reflects the consensus reached by the Cypriot government with the Eurogroup. The implementation of the reform measures included in the draft programme is the best guarantee for a more prosperous future for Cyprus and its citizens, through a viable financial sector, sound public finances and sustainable economic growth. I reiterate that the stability levy on deposits is a one-off measure. This measure will - together with the international financial support - be used to restore the viability of the Cypriot banking system and hence, safeguard financial stability in Cyprus. In the absence of this measure, Cyprus would have faced scenarios that would have left deposit holders significantly worse off.
The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below €100,000. The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on 16 March, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to €10bn.
The Eurogroup takes note of the authorities' decision to declare a temporary bank holiday in Cyprus on 19-20 March 2013 to safeguard the stability of the financial sector, and urges a swift decision by the Cypriot authorities and parliament to rapidly implement the agreed measures.
The euro area Member States stand ready to assist Cyprus in its reform efforts on the basis of the agreed adjustment programme.
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Sarris says no loan deal with Russia yet but talks continueCyprus's finance minister Michalis Sarris has said there has been no decision on a loan from Moscow yet but talks are continuing, according to Reuters.
Last night an idea circulating was that Russia would help out financially in return for some of the island's energy rights.
Meanwhile Austrian finance minister Maria Fekter said the European Central Bank would not provide liquidity indefinitely to Cypriot banks. The banks, currently closed, are dependent on emergency funding from the ECB and last night it said:
The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners
The ECB reaffirms its commitment to provide liquidity as needed within the existing rules.
But Fekter told reporters (quotes from Reuters):
[If Cyprus does not come up with a new plan] then the banks won't open on Friday because the ECB will not provide any more liquidity. That is a more horrible scenario than what is on the table now.
We will certainly help out the Cypriots but only under conditions that make sense. Certainly neither the ESM [bailout fund] nor the ECB can allow a bottomless pit.
finance minister, Michael Sarris, held inconclusive negotiations with top Russian officials on Wednesday, but said he would stay in Moscow "as long as it takes" to reach a deal.
A lifeline from the Kremlin has gained increasing urgency after the Cypriot parliament rejected a plan on Tuesday to impose a levy on bank deposits in order to raise €5.8bn towards a €10bn bailout offered by the European Union.
Fears that a financial meltdown could ripple across Europe continued to grow. The Cypriot government was said to be considering imposing capital controls amid fears that money would flood out of the country once its banks were re-opened.
To stem the damage, Cyprus is seeking a five-year extension on a €2.5bn loan granted in December 2011 that is due to mature in 2016. It has also asked Russia to refinance the loan and lend an additional €5bn.
With an estimated $31bn held in Cypriot banks by Russian banks, businesses and individuals, as well up to $40bn in loans to Cyprus-registered firms, Russia has been gripped by fear since the crisis began to unfold, with state-run television transmitting rare live reports from outside the Cypriot parliament.
Yet the Kremlin's reputation for seeking hard assets abroad in exchange for aid has prompted speculation that negotiations were dragging as it bargained for stakes in offshore gas fields and Cypriot banks.
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