Lawmakers in Cyprus approved three key bills Friday that aim to raise enough money to qualify the country for a broader bailout package and help it avoid financial ruin in mere days.
A total of nine bills were approved, including a key one on restructuring the country's ailing banks, which lost billions on bad Greek debt; one on restricting financial transactions in times of crisis; and one that sets up a `solidarity fund' into which investments and contributions will flow.
More bills to meet the total target of $7.7 billion Cdn Cyprus needs to secure an international bailout will be brought for a vote over the weekend.
They include a crucial one that would impose a tax of less than 1 per cent on all bank deposits, said Averof Neophytou, deputy head of the governing DISY party.
"We are voting for the least worst option," Neophytou said in a speech. "We owe an apology to the Cypriot people because we all share in the responsibility of bringing this place to this state."
Approval of the tax would come just days after Parliament decisively turned down a plan that would have seized up to 10 per cent of people's bank deposits. The plan triggered an outcry from people who condemned it as an unfair grab of their life savings, while politicians saw it as causing irreparable damage to the country's financial center status.
Nonetheless, ordinary Cypriots have said they would willingly sacrifice a portion of their savings to save the country — just as long as somebody doesn't impose it on them.
"If we have Europe's support so our banks won't collapse, I wouldn't have a problem with a deposit tax," said pensioner Demetrakis Papanicolaou, 64. "But we need to hear this not only from our government, but from the Europeans."
Cyprus' president, Nicos Anastasiades, will travel to Brussels on Saturday to present the revised package to the country's prospective creditors, its fellow countries that use the euro currency and the International Monetary Fund. There has been no indication yet that they will accept it.
Cyprus has been told to raise 7.7 billion Cdn to qualify for 13.3 billion Cdn in rescue loans from the eurozone and the IMF.
Passage of the bills allows Cypriots to breathe a little easier as the country faces a pressing Monday deadline, when the European Central Bank has said it will stop providing emergency funding to the country's banks if a new plan is not in place.
Without the ECB's support, Cypriot banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-country eurozone.
But eurozone officials said they had still not seen all the details and would have to discuss whatever final plan Cyprus presents.
Government spokesman Christos Stylianides said there had been "consultations all day" with representatives of the IMF, European Central Bank and European Commission — collectively known as the troika — who monitor and vet adherence to bailout conditions.
'The bank is finished, we'll lose our jobs and I'm worried about my kids.' —Nikos Tsiangos, Laiki employee
The most important bill passed Friday is aimed at restructuring the country's second largest and most troubled bank, Laiki, and restricting some financial transactions once banks, which have been closed since Saturday, reopen on Tuesday.
Worried Laiki employees gathered near parliament for a second day to protest the bank's restructuring, which would break the lender in two.
"The bank is finished, we'll lose our jobs and I'm worried about my kids," Laiki employee Nikos Tsiangos said. "They've brought us to the brink. The Europeans wanted to destroy our economy, and they've done it."
The restructuring of Laiki and the sale of the toxic-laden Greek branches of Cypriot banks is expected to cut the amount the country needs to raise to about 4.3 billion Cdn instead of 7.7, Neophytou said.
With the deposit tax back in play, Neophytou said discussions were continuing on what percentage of accounts above the guaranteed $133,000 Cdn limit would be seized, in exchange for bank bonds.
That will happen for deposits in Laiki and other banks including the country's largest, the Bank of Cyprus, which also took significant losses on Greek debt.
Laiki bank's acting CEO, Takis Phidias, condemned the plan. "I'm certain that there will be chaos after these bills are approved."
Phidias said the initial plan to seize deposits across all Cypriot accounts "would have more evenly shared the burden and certainly, it would have safeguarded both large banks. I'd like to believe that there's still time to carry out this negotiation."
No Russian contribution
The Bank of Cyprus said it backed the idea of confiscating some percentage of all bank deposits over 133,000 Cdn because there were no immediate alternatives.
The bank warned Cypriots that "a potential collapse of the banking sector could lead to the total loss of all deposits above 133,000 Cdn and the immediate sale of all collateral accompanying non-performing loans."
Meanwhile, Cypriot efforts to clinch a contribution from Russia appeared to have failed. Russia is a key player in the crisis, as Russian depositors have parked around $26.5 billion Cdn in the country.
Cyprus' finance minister, Michalis Sarris, returned to Cyprus on Friday night after spending three days in Moscow trying to drum up support.
"We will only be ready to discuss various ways of support for that state only after the EU nations and Cyprus work out a final settlement," Russian Prime Minister Dmitry Medvedev told a news conference.
Russia's finance minister, Anton Siluanov, said the Cypriots were seeking investment from Russian companies in a Cypriot state-owned firm that will manage revenue from the island's newfound offshore gas. The Russian investors, however, were not interested.
Cyprus also offered stakes in some of its banks, but there were no takers in Moscow for that, either. Siluanov also said they were not discussing providing a new loan to Cyprus, as the EU has set a debt limit for Cyprus.
Europe also turned up the pressure on Cyprus. Luxembourg's finance Minister Luc Frieden told Germany's Inforadio that Cyprus "certainly must change a very great deal in its financial sector ..... I see among some euro states little financial room for more concessions to Cyprus."