Thursday

20th Feb 2020

Cyprus MPs pass bank laws, start bailout talks

Cyprus edged back from the brink of bankruptcy on Friday (22 March) after MPs agreed to a series of emergency reforms in a bid to avoid financial meltdown and a traumatic exit from the euro.

Facing a Monday deadline (25 March) to agree on a rescue package before the European Central Bank withdraws its emergency lending programme from Cypriot banks, MPs adopted legislation to restructure the country's fragile banking sector by giving the government the power to split up institutions into 'good' and 'bad' banks.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

Cyprus will also set an unwanted precedent by becoming the first eurozone country to introduce capital controls. Limits on bank withdrawals and transfers of funds will come into place when Cyprus' banks open for business on Tuesday (26 March).

The controls are an attempt to avoid a run on the country's fragile banks, whose balance sheets amount to around eight times the size of the island's economy, after a week of lockdown.

MPs also voted to create a solidarity fund to pool state assets.

After three days of talks with Russian government officials in Moscow failed to deliver a promise of new funding, Cyprus has been forced to refocus its attention on an EU bailout.

Despite MPs decisively rejecting the EU's €10 billion package on Tuesday (19 March) amid large public protests, EU leaders have refused to increase the size of the loan.

Dutch finance minister Jeroen Dijsselbloem, who chairs the Eurogroup of the 17 finance ministers who countries use the euro, warned that Cyprus would not be able to repay a bigger loan. "Anything above €10 billion would not allow them to make a restart," he said.

Deputies in the 56-member House of Representatives will reconvene on Saturday and are set to vote on a revised deposit levy expected to fund the bulk of a €7 billion contribution by Cyprus as a condition of its €10 billion bailout package.

Plans to raise €5.8 billion via a 6.75 percent hit on savings between €20,000 and €100,000 and a 9.9 percent levy on deposits over €100,000, led to Cypriot MPs rejecting the initial bailout offer by eurozone finance ministers.

However, while the proposal to be voted Saturday is set to exempt all savings below €100,000 in conformity with EU rules on deposit guarantees, it could see big deposits facing a levy of up to 15 per cent.

Finance ministers will then meet in Brussels on Sunday (24 March) with a view to reaching agreement on a rescue package. The meeting, which EU officials warn could last well into Monday morning, will also be attended by IMF boss Christine Lagarde.

For their part, European Council President Herman van Rompuy and European Commission counterpart Jose Barroso shelved next week's EU summit with Japan to focus on the Cypriot crisis.

In a statement, the EU leaders said that "the on-going efforts to find a solution for the financial situation of Cyprus require our presence in Brussels."

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.

Analysis

Cyprus 'business model' was no mystery to EU

EU politicians are saying Cyprus must scrap its "unsustainable business model." But data shows the writing was on the wall ever since the island joined the euro, five years ago.

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. EU unveils white paper on AI and data strategy
  2. Dutch court rules against Russia in €46bn Yukos case
  3. Britain to bar 'Polish plumber-type' migrants
  4. Greece seeks EU help to get back classical statues from UK
  5. HSBC to cut 35,000 jobs worldwide
  6. Regions chief appeals against cutting EU cohesion funds
  7. Verhofstadt criticises UK Brexit negotiator
  8. Turkish court acquits Gezi park activists

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  2. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  3. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  4. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  5. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  6. Nordic Council of MinistersNordic Climate Action Weeks in December

Latest News

  1. EU leaders face major clash on rule of law budget link
  2. North Macedonia warns EU on 'dirtiest ever' election
  3. Western 'endarkenment' and the voodoo politics of Europe
  4. Warning of agricultural 'digital arms race' in EU
  5. Cayman Islands put on tax-haven blacklist after Brexit
  6. Boris' Brexit bluff? - UK will resist alignment to the end
  7. US still open to Kosovo-Serbia land swap
  8. EU countries enter final phase of budget talks

Join EUobserver

Support quality EU news

Join us