Merkel disapproves of the Cypriot proposal, which involves bundling state assets into a "Solidarity Fund" that includes the country's retirement fund to back bond issues. According to reports on Friday, she is not alone. The troika, made up of the European Commission, the European Central Bank and the International Monetary Fund, agrees with her assessment.
What happens next? "I hope that it doesn't result in a crash," Merkel told FDP parliamentarians according to a meeting participant. Merkel has long warned of a potential domino effect should a euro-zone member state enter insolvency. But now, her government is no longer excluding the possibility.
The chancellor is particularly frustrated by the lack of communication with Cypriot leaders even as the situation worsens dramatically. Some in her party have even used the word "autistic" to describe Nicosia's apparent unwillingness to communicate with Berlin. "What we have never experienced before is that, over a period of days, there has been no contact with the EU or with the troika," Merkel reportedly told the parliamentarians. Merkel, for her part, managed to force herself on Friday to return to the moderate words for which she has become famous. She insisted she will try to "be emotionally wise." On this particular Friday, it wasn't easy.
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20.00 Cyprus' president and party leaders to meet European officials in Brussels tomorrow.
19.49 And what about the solutions? RBS has outlined four to resolve what it labels a "Mexican standoff", including renegotiating a bank rescue, asset sales, and even a euro exit (though it says this option is unlikely). It also says that getting Russia's isn't as straightforward as it might seem. Alberto Gallo and his team write:
Many Russian companies use Cypriot banks for cash management due to the two countries double-taxation treaty and Cyprus’ low tax rates. Therefore capital controls could create operational disruptions for Russian companies, hurting output. This may give Russia an incentive to contribute in some way.
However, according to our Russia economists, the country is in no rush to strike a favourable deal for Cyprus, and deposit levies provide little deterrent, given much belongs to Russia’s anti-Putin middle class. But Russia could be interested in the 7tn cubic feet Block 12 offshore gas reserves from Cyprus, which would be worth around €60bn at current prices.
To re-iterate, the decision to approve the capital controls bill means Cypriots are likely to soon face tough restrictions on how much money they can take out of their bank, on access to their own savings, and on their ability to transfer funds.
This is the full list of powers that could be imposed ( translated by @YiannisMouzakis this morning)
•Restrictions in daily withdrawals
•Ban on premature termination of time savings deposits
•Compulsory renewal of all time savings deposits upon maturity
•Conversion of current accounts to time deposits
•Ban or restrictions on non cash transactions
•Restrictions on use of debit, credit or prepaid debit cards
•Ban or restriction on cashing in checks
•Restrictions on domestic interbank transfers or transfers within the same bank
•Restrictions on the interactions/transactions of the public with credit institutions
•Restrictions on movements of capital, payments, transfers
•Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety
MPs are now getting their teeth into the remaining laws (seven of them, we believe) which are all based around the restructuring the country's banking sector.
9.04pm GMT
Historic moment for the eurozone as capital controls approved
To re-iterate, the decision to approve the capital controls bill means Cypriots are likely to soon face tough restrictions on how much money they can take out of their bank, on access to their own savings, and on their ability to transfer funds.
This is the full list of powers that could be imposed ( translated by @YiannisMouzakis this morning)
•Restrictions in daily withdrawals
•Ban on premature termination of time savings deposits
•Compulsory renewal of all time savings deposits upon maturity
•Conversion of current accounts to time deposits
•Ban or restrictions on non cash transactions
•Restrictions on use of debit, credit or prepaid debit cards
•Ban or restriction on cashing in checks
•Restrictions on domestic interbank transfers or transfers within the same bank
•Restrictions on the interactions/transactions of the public with credit institutions
•Restrictions on movements of capital, payments, transfers
•Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety
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