Revamped Cyprus deal to close bank, force losses
Updated: 2013-03-25 10:50
In the Cypriot capital, Nicosia, on Sunday the mood was anxious.
"I haven't felt so uncertain about the future since I was 13 and Cyprus was invaded," said Dora Giorgali, 53, a nursery teacher who lost her job two years ago when the school she worked at closed down.
"I have two children studying abroad and I tell them not to return to Cyprus. Imagine a mother saying that," she said in a central Nicosia square. "I think a solution will be found tonight but it won't be in the best interests of our country."
Cyprus's banking sector, with assets eight times the size of its economy, has been crippled by exposure to Greece, where private bondholders suffered a 75 percent "haircut" last year.
Without a deal by the end of Monday, the ECB said it would cut off emergency funds to the banks, spelling certain collapse and potentially pushing the country out of the euro.
Conservative leader Anastasiades, barely a month in office and wrestling with Cyprus' worst crisis since a 1974 invasion by Turkish forces split the island in two, was forced to back down on his efforts to shield big account holders.
Anticipating a run when banks reopen on Tuesday, parliament has given the government powers to impose capital controls.
About 200 bank employees protested outside the presidential palace on Sunday chanting "troika out of Cyprus" and "Cyprus will not become a protectorate".
In a stunning vote on Tuesday, the 56-seat parliament rejected a levy on depositors, big and small. Finance Minister Michael Sarris then spent three fruitless days in Moscow trying to win help from Russia, whose citizens and companies have billions of euros at stake in Cypriot banks.
On Friday, lawmakers voted to nationalise pension funds and split failing lenders into good and bad banks - the measure likely to be applied to Laiki. The plan to tap pension funds was shelved due to German opposition, a Cypriot official said.
The revised bailout plan many not require further parliamentary approval since the idea of a levy was dropped.
The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.