Cyprus: Vote delayed as bailout talks continue - live
LIVE• Debate on on bank restructuring and capital controls laws pushed back until this evening
• Angela Merkel: pension assets must not be used
• More protests outside parliament
• Finance minister flies back from Moscow empty handed
• Angela Merkel: pension assets must not be used
• More protests outside parliament
• Finance minister flies back from Moscow empty handed
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Government spokesman: next few hours will determine our fate
Cyprus's top government spokesman has told reporters that 'the next few hours' will determine the future of the country, as rumour swirls over its latest plans for a bailout (see 10.43am)
Christos Stylianides added that MPs will have to take "difficult decisions" later today, now that legislation to impose capital controls and split Laiki Bank have been submitted to parliament.
Here's the full statement:
Statement by the Government Spokesman, Mr Christos Stylianides
The President of the Republic and the Government are in hard negotiations with Troika in order to conclude to solutions that will save the banking system, the economy in general and will bring back calmness in the country. During these really critical hours, everyone must demonstrate the highest level of responsibility.
The President of the Republic, as he mentioned during his address to the nation, assumed a high political cost and accepted the deal with the Eurogroup for the stability levy, despite his disagreements, bearing in mind the social misery that a possible rejection of the proposal would cause.
In a few hours we will be called upon to take the big decisions and reply to the hard dilemmas.
The Government has already submitted the bills. The philosophy through which it is trying to find the best possible solution, under the given circumstances, is already known.The House of Representatives will soon be called upon to take the big decisions.Undoubtedly, there will also be painful aspects in any decision taken, but the country must be saved.
The political leadership must, despite the different ideological and political approaches,provide the way out. The President of the Republic as the guardian of unity kept the political leadership constantly briefed and respected the decision of the House of Representatives. Through the continuous meetings with the party leaders he aimed at collective wisdom.
The next few hours will determine the future of this country. We must all assume our responsibility.
The next few hours will determine the future of this country. We must all assume our responsibility.
[end]
People continue to queue up at cash machines of Laiki (Popular) bank this morning - but we're not seeing a big panic (Laiki savers should now have their deposits protected under the plan to split it)
Reports: Troika 'rejects Plan B'
The government's plan for a national solidarity fund may have been rejected by the country's international lenders, according to two reports from Cyprus this morning.
And that has left some MPs in Cyprus talking about a return to the deposit tax that appeared to have been abandoned a few days ago.
Cypriot President Nicos Anastasiades held talks with the troika in Nicosia on Friday morning as it looked like his government might have to abandon plans to create an investment fund to prevent the collapse of its banking system.
As reported earlier (see here), Angela Merkel remains opposed to using Cyprus's pension reserves as assets in the Solidarity Fund which was being drawn up.
The Financial Times is also reporting that the Troika (the IMF, the ECB and the EU) have told Cyprus that the plan drawn up yesterday isn't acceptable:
“There was some discussion of going back to the original plan of a bank levy, but there are objections from the central bank,” said one person with knowledge of the talks.
We are still chasing more detail on the situation, and it's important to note that other newswires with good people on the ground are not reporting it as fact. Yet anyway.
Hopefully we should know more soon – when government spokesman Christos Stylianides has addressed the media....
My colleague Helena Smith is in Nicosia, and reports that there is still optimism that the legislation will be voted through today:
Just spoke to former MP economist Marios Mavrides who was optimistic despite Merkel's criticism of the Cypriot government's latest rescue plan.He said he thought the island's 56-member parliament would easily endorse all nine bills to keep the banking sector afloat. "Every hour that passes is absolutely critical," he said. "Restructuring of Laiki will raise €2.7bn and I have no doubt that it will be passed probably later this afternoon," he said.
What capital controls mean
We now have details of the 'capital controls' which Cyprus intends to vote into law (sometime) today, thanks to star blogger @YiannisMouzakis:
It's a remarkable set of restrictions on the usual nuts and bolts of the financial system - particularly given the final point:
- Restrictions in daily withdrawals
- Ban on premature termination of time savings deposits
- Compulsory renewal of all time savings deposits upon maturity
- Conversion of current accounts to time deposits
- Ban or restrictions on non cash transactions
- Restrictions on use of debit, credit or prepaid debit cards
- Ban or restriction on cashing in checks
- Restrictions on domestic interbank transfers or transfers within the same bank
- Restrictions on the interactions/transactions of the public with credit institutions
- Restrictions on movements of capital, payments, transfers
- Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety
The crisis in Cyprus has hit business confidence in Germany, which has dropped for the first time in five months (according to Munich's Ifo institute).
And if Germany business leaders are worried, it's a fair bet that those in other eurozone countries are too. Not good for the eurozone's hopes of escaping recession soon. More details here on Bloomberg.
Heads-up: European Commission president José Manuel Barroso and Russian president Dmitry Medvedev are hold a press conference in Moscow soon. It will be streamed here.
Merkel on Cyprus
Back to Germany, and Angela Merkel has discussed the Cyprus crisis with MPs at a closed door session this morning.
Reuters has got the details:
German Chancellor Angela Merkel told lawmakers on Friday the nationalisation of pension funds in Cyprus would not be an acceptable way of plugging a hole in its finances to qualify for an international bailout, parliamentary sources said.Merkel was also quoted by two MPs from her centre-right coalition as saying that debt sustainability and the restructuring of its banks must be core elements of any new Cyprus deal, which she called an matter of "credibility".
Merkel apparently also told MPs that she wanted Cyprus to remain within the euro, but that it "must realise its business model is dead".
That fuels the suspicion that Germany was determined to end Cyprus's close financial links to Russia.
Updated
No market panic
Shares on Europe's financial markets are mainly lower this morning, but the situation remains pretty calm as the Cyprus crisis plays out:
FTSE 100: up 3 points at 6391, + 0.04%
German DAX: down 47 points at 7884, - 0.6%
French CAC: down 24 points at 3750, - 0.6%
Spanish IBEX: down 68 points at 8282, - 0 .7%
Italian FTSE MIB: down 4 points at 15929. - 0.04%
And the euro is flat, at around $1.291 against the US dollar.
So why no panic, given the risk of Cyprus's bailout collapsing, followed by its banks next week if the ECB walks away? Well, analysts and traders seem to be clinging to the hope that a deal will be agreed in time.
As Chris Weston of IG Index put it:
One gets the sense that at the end of the day the Cypriots should see the pain that will come from a disorderly bank failure, and cobble together a weekend deal.Or at least that’s the plan, because if they don’t the ECB will not be there to help them out on the liquidity front. A final weekend agreement is our base-case.
Cyprus state TV is reporting that a government spokesman will make a statement on the situation at noon local time, so in around 45 minutes.
Photos: more protests outside Cyprus parliament
A protest rally is taking place outside Cyprus's parliament this morning, including many banking sector workers who face losing their jobs through the restructuring of Laiki Bank:
Updated
Session delayed
The vote in Cyprus has been delayed until this afternoon.
There are reports that this is to allow finance minister Michalis Sarris to return to parliament and update MPs on his trip to Russia.
Updated
A crisis of 'stupidity'
Sir Howard Davies, former boss of Britain's Financial Services Authority, just told Radio 4 Today programme that this is a crisis of 'stupidity', and that it was "too big an ask" to take a levy from deposit holders (as in the original plan).
The IMF and EU are going to have put more funds in unless they want Cyprus to "slip out" of the euro, he added.
But Germany's Michael Meister, the deputy leader of the CDU party, rejected the criticism - saying Cyprus was being treated fairly, and needed to take the necessary steps to bring its finances into line.
If we relax the rules for Cyprus, how will Ireland, Greece, Portugal et al feel, he asks.
There are signs this morning of rising frustration in Germany.
Volker Kauder, parliamentary leader of Angela Merkel's CDU party, has warned that Cyprus is "playing with fire", and needs to find a workable proposal to find its share of the bailout urgently.
Kauder also told the ARD TV station that Germany would not support the nationalisation of Cyprus's pension funds (one possible way to find the shortfall in the bailout plan).
I don't think this can happen, because this would be huge for pensioners, for the small people. So I don't think this is a proposal that help...If a proposal comes, I am optimistic. But we aren't there yet.....I still believe we will get a settlement, but Cyprus is playing with fire.
Russia: no new help for Cyprus
Russia's finance minister has also confirmed that talks with Cyprus over a possible rescue package have ended without a new deal.
Anton Siluanov has told reporters in Moscow that Russia would wait to see whether Cyprus reached a new deal with the Troika (the EU, the IMF and the ECB) first.
Siluanov said:
The talks have ended as far as the Russian side is concerned
Yesterday, Cyprus's finance minister Michalis Sarris had said he hoped to interest Russian investors in taking stakes in Cyprus's banks and energy deposits
Updated
MPs vote on bank restructuring legislation this morning
Good morning and welcome to our rolling coverage of the Cyprus crisis,as it struggles to agree a new bailout deal as the clock ticks towards the Monday deadline set by the European Central Bank.
MPs in Nicosia are preparing to vote on new legislation to restructure its banking sector this morning.
The vote, on nine different bills, will pave the way to restructuring its second largest bank, Laiki, and imposing unprecedented restrictions on financial transactions on the sector.
The session, which begins at 8am GMT, is a crucial step for Cyprus (in its push for Plan B), and should should cut more than €2bn off the €6bn which Cyprus must find.
But Cyprus will still need to reach a deal with the eurozone and the International Monetary Fund before the ECB carries out its threat to withdraw liquidity support on Monday.
And without that plan, Cyprus's position looks pretty shaky this morning.
The vote comes as finance minister Michalis Sarris flies home from Russia, apparently having failed to secure fresh support from Moscow.
"I think we are not able to get the support that we wanted to get,” Sarris said in an interview after checking out of the Lotte Hotel in downtown Moscow. “But we must go back home because things are getting serious.”
We'll be following all the latest developments through the day.
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