Wednesday

21st Feb 2018

Cyprus on the brink of euro exit after ECB ultimatum

  • The ECB could pull the plug on emergency funds to Cyprus' banks (Photo: Valentina Pop)

Cyprus is on the brink of bankruptcy and of becoming the first-ever country to leave the euro after the European Central Bank (ECB) issued an ultimatum on Thursday (21 March).

In its statement, the ECB warned that it would turn off the tap of emergency funding to Cyprus' banks on Monday if a rescue package is not agreed.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Removing Cyprus' emergency support could see the country's two largest banks, Bank of Cyprus and Laiki, collapse within days.

Carston Brezki, senior economist at ING, described the ECB's move as a "gun at the head of Cyprus."

But he expressed doubt if the ECB would really switch off Cyprus' financial life support.

"It is hard to imagine that the ECB would really be willing to be the one to pull the trigger," he noted.

The Cypriot government of president Nicos Anastasiades is now scrambling for a Plan B to put to the eurozone, involving alternative ways to raise the €6 billion contribution on which the eurozone's €10 billion bailout package is conditioned.

Using the island's natural gas reserves, pension funds or state-owned assets as collateral have all been mooted as possible means to raise the cash.

A set of bills were tabled yesterday in Nicosia, including plans to create a state investment fund to raise Cyprus' contribution.

The Cypriot parliament is also expected to vote on legislation to impose capital controls restricting the amount of money customers can take out of their bank accounts when, or if, they reopen next week.

Cypriot banks, which have been shut since the rescue plan was agreed by finance ministers in Brussels , are expected to remain closed until next Tuesday in a desperate bid to avoid a bank run with account holders panicking at the prospect of losing their savings.

Meanwhile, finance minister Michalis Saris will remain in Moscow for a third day of talks with Anton Siluanov, his Russian counterpart.

Despite reports linking Gazprom to a multibillion euro loan to Cyprus in exchange for access to the island's recently discovered natural gas reserves, time is rapidly running out for a formal offer to be made.

Panicos Demetriade, governor of the Cypriot central bank, insisted that the deadline would be met.

"We will have a programme of support for Cyprus by Monday," he said.

In a further blow, rating agency Standard & Poor's downgraded Cyprus to CCC, a junk status that is only two notches above default.

Following a tense telephone conference between eurozone finance ministers on Thursday, the Eurogroup issued a statement that it is "prepared to continue negotiations on an adjustment programme."

It added that it "reaffirms the importance of fully guaranteeing deposits below €100,000" in the EU.

Eurogroup boss: Cyprus levy is 'inevitable'

Eurogroup boss Jeroen Dijsselbloem told MEPs on Thursday that Cypriot savers will have to lose money no matter what the final shape of the bailout deal.

Cyprus struggling on bailout Plan B

With no firm offer from Russia, Cypriot officials are scrambling to find alternative money to secure a €10 billion EU bailout.

Cyprus blamed for decision to tax small savers

The European Commission has said it was Cyprus itself that insisted on the most unpopular detail of its bailout. But the commission is not squeaky clean either, say others.

Cyprus MPs pass bank laws, start bailout talks

Cyprus edged back from the brink of bankruptcy on Friday after MPs agreed to a series of emergency reforms - including capital controls - in a bid to avoid financial meltdown.

Eurozone agrees Cyprus bailout 2.0

Cyprus' Laiki bank is to be wiped out. Depositors in Bank of Cyprus will also take a hit under a new bailout deal. But details remain sketchy.

News in Brief

  1. MEPs approve anti-smuggling bill on tobacco
  2. SPD members start voting on new Merkel-led government
  3. Barroso lobbied Katainen for Goldman Sachs
  4. Berlusconi's coalition ahead with 34.7% support
  5. Moscovici: Greece '99 percent' there to get new bailout
  6. Simone Veil to enter France's Pantheon in July
  7. German poll puts far-right AfD ahead of SPD for first time
  8. Commissioners poised to join EU-Mexico trade talks

Stakeholders' Highlights

  1. International Climate ShowSupporting Start-Ups & SMEs in the Energy Transition. Tomorrow the Brussels Pre-Event
  2. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  3. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  4. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  5. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  6. EPSUMovie Premiere: 'Up to The Last Drop' - 22 February, Brussels
  7. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  8. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  9. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  10. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  11. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name
  12. Dialogue PlatformBeyond the Errors in the War on Terror: How to Fight Global Militarism - 22 February

Latest News

  1. Eastern states push back at rule of law conditions on funds
  2. Katainen explains: My friend Barroso did not lobby me
  3. A European budget: securing a prosperous future for Europe
  4. Poland wrong to log in ancient forest, says EU lawyer
  5. EU taxpayers risk bailing out MEP pension scheme
  6. Commissioner Katainen confirms Barroso lobbied him
  7. Eurogroup chief pledge on transparency after meeting MPs
  8. Poland shows no sign of concessions to Commission