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Cyprus’s fate will be decided tonight

24 March 2013 / 16:03:28  GRReporter
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An official of the Cypriot government described the talks between the Troika and the Cypriot government as extremely difficult, after the most recent disagreement on the rescue package for the Cypriot economy, which, according to the Athens News Agency, occurred on Saturday evening.

The disagreement was due to the unchanged position of the International Monetary Fund, and, in particular, its representative in Cyprus, Delia Delkouleskou, who seems to have instructions from the Director of the Fund, Christine Lagarde, to insist on the same treatment for the Bank of Cyprus, which applies to Laiki Bank. Delkouleskou insists that the bank be divided into a "good" bank and a "bad" bank, according to the model of Laiki Bank, and then that the two "good" parts of both banks be merged. Reportedly, the Bank of Cyprus and the government refused to accept the Troika and the IMF’s request.

Cypriot considers this development as unjust because the Bank of Cyprus will take over the payment of a loan of about 9 billion euro that Laiki Bank has taken from the European Central Bank. Based on issues discussed until late last night, when Delkouleskou posed the issue of the Bank of Cyprus, the agreement provided for the recapitalisation of the Bank of Cyprus, with cuts of about 20% in deposits exceeding 100,000 euro. All deposits in all banks will be guaranteed according to the deposit rather according to the account. A solidarity contribution will be imposed on all deposits exceeding 100,000 euro in Cypriot banks, in order to provide money for social care funds and other accounts of public importance in Laiki Bank, and the rate of contribution will not exceed 4%. A source told the Athens News Agency that, after the IMF did not change its opinion, the question is what the opinion of the European Central Bank and the European Commission will be.

Since 6:00 p.m. on Saturday, Eurogroup’s President Jeroen Dijsselbloem has scheduled a meeting in twitter, which will be held at 7:00 p.m. Greek time today. President of Cyprus Nicos Anastasiades left for Brussels at 7:15 p.m. Greek time, where he will continue negotiations for the completion of the tax agreement for the rescue of the Cypriot economy.

The marathon session of the Council of Political Leaders, which was convened by Anastasiades in order to discuss the latest developments in the taxation agreement between Cyprus and creditors, ended at 1 a.m. During the meeting, political leaders were briefed by representatives of the Troika, who are in Cyprus.

In Brussels, Anastasiades is accompanied by Vice-President of the Democratic Rally (DISY), Averof Neofitou, Minister of Finance Michalis Sarris and government official Christos Stylianidis, as well as a delegation of the Central Bank and the Ministry of Finance. Anastasiades is expected to meet European officials, as well as Director of the IMF, Christine Lagarde. During the talks in Brussels, party leaders will hold continuous sessions at the Presidency and will consult with President Nicos Anastasiades.

A bank source told the Athens News Agency that Laiki Bank was “clinically dead” and the Bank of Cyprus was “on mechanical ventilation”. According to him, the Bank of Cyprus must be rescued at all costs, in order to rescue the Cypriot economy.

Reportedly, the IMF and Berlin are seeking liquidation of the Bank of Cyprus and Laiki Bank. The opinion of the IMF could be mitigated, and the other two sides of the Troika, the European Commission and the European Central Bank, seem happy with Lefkosia’s opinion.

Tags: Cyprus restructuring of the banking system Bank of Cyprus Laiki Bank cutting deposits IMF
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