Cyprus Banks To Remain Closed Amid Crisis

Banks in Cyprus will remain closed on Thursday and Friday while the country scrambles to find a way to secure bailout funds after rejecting a levy on all savings.

With Monday a public holiday, the move effectively closes lenders until Tuesday, March 26.

The finance ministry said the decision had been taken “on grounds of public interest in order to ensure financial stability”.

Banks have already been closed since last Saturday as Cyprus seeks to prevent the uncertainty prompting a run on them.

While money is still available from cash machines, the lack of liquidity in the market has seen petrol stations close their credit card facilities and many stores refuse to accept cheques.

Cyprus’ cabinet went into emergency session on Wednesday after voting against the tax on all savings, which was originally agreed with international lenders to secure a 10bn euro (£8.6bn) bailout package.
The acting leader of the ruling Disy party, Averof Neophytou, said ministers planned to meet late into the night.

“We will not sleep tonight until we find a solution … I am confident we will find a solution so we do not go bankrupt,” he said.

State radio said legislation had been drafted to restrict the outflow of cash from the island once the banks reopen. These would need to be passed by the cabinet and by parliament.

The troika of the European Union, European Central Bank and International Monetary Fund said it would only provide Cyprus with the bailout if it raised 5.8bn euros through the levy.

Local media reported the government was considering raising money from domestic sources including provident funds, and restructuring the teetering banking sector in order to meet the shortfall.
However, Cypriot officials were unable to agree a deal to secure funding from one alternative source after talks in Moscow failed to secure any assistance.

Finance minister Michael Sarris went to Russia asking for a five-year extension on a 2.5bn euro loan granted in December 2011 that is due to mature in 2016 and lend an additional 5bn euro.

Russian Prime Minister Dmitry Medvedev has called the bailout bungled, but said a solution should not damage Russia’s relations with the EU.

“It seems to me that every mistake possible in this situation has been made,” he was quoted as saying by the Interfax news agency.

Russians reportedly hold up to half of all Cypriot deposits.