South Cyprus President Anastasiades and party leaders have flown out to Brussels, this morning, to see if the recent spate of legislation they have passed into law will be sufficient to allow them to receive the EU bail-out fund of 10 billion Euros.
Even more pressing, is to ensure that the EU provides sufficient liquidity on Monday to prevent the two largest banks in the South going bust.
9 bills were passed on Friday night by the 56 member Parliament though the passage of these was not easy. The Greek Cypriots hope that these will appease the EU and particularly the hard liners of Germany and Finland. These new laws allow for bank restructuring as well as capital controls.
It is now accepted that a bank haircut for larger depositors will be required, though this was initially unanimously rejected. It seems that this has been left as a negotiating point in Brussels.
However depositors with more than 100,000 Euros may well be hit twice, once with a bank levy and then again when their deposits are transferred into a so-called ‘bad’ bank where they will be written down substantially.
As we understand it, the initial EU proposal had, in fact, wanted to spare smaller depositors but that the Greek negotiating team decided not to load the bank levy on larger depositors. They felt that this would dent the lucrative offshore banking market which has been a haven for Russian funds. It is hard to see how that industry will survive, no matter what the outcome.
EU finance Ministers are due to meet on Sunday to determine if the final package proposed by the Greek Cypriots is acceptable.
