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June 30, 2022

Cyprus seeks Russian rescue, EU threatens cut-off

Cyprus’s three international lenders descended upon the presidential palace Wednesday for discussions on whether and how a financial lifeline for the crisis-hit nation could be secured, as the country’s finance minister pressed his case in Moscow in hopes of securing further aid from Russia, nytimes.com informs. The talks come a day after the Cypriot Parliament rejected a bill to impose a tax on average depositors’ bank accounts as a condition for a bailout deal. The government, and even the Church of Cyprus, scrambled Wednesday to come up with new ways to meet the demands of the three lenders – the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF), known as the troika – to avoid an imminent collapse of its banking sector. A deal must be reached by Thursday, the day that a bank holiday in Cyprus is scheduled to end, according to the Cypriot central bank. In case an accord is not struck, the Finance Ministry is preparing to order banks to stay closed through at least next Tuesday. “The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners,” the bank said in a statement. “The ECB reaffirms its commitment to provide liquidity as needed within the existing rules. The finance minister of Cyprus, Michalis Sarris, met on Wednesday morning with his Russian counterpart, Anton G. Siluanov, at the Russian Finance Ministry, and with a deputy prime minister, Igor I. Shuvalov, at the main government offices in the Russian White House. Sarris reported no progress. “We had a very good first meeting – a very constructive, very honest discussion. We underscored how difficult the situation is and we will now continue our discussions to find a solution by which we hope we will be getting some support from Russia.” Russia’s finance ministry said Nicosia had sought a further 5 billion euros, on top of a five-year extension and lower interest on an existing 2.5 billion euro loan, according to euronews.com.The head of the Church of Cyprus went on television to propose putting all of its properties up as collateral so that the state could issue a new round of sovereign bonds to raise money. The church is one of the largest and most influential investors on this Mediterranean island, with vast holdings in banks, real estate and other interests. Archbishop Chrysostomos II suggested that all of the Church’s dioceses, parishes and monasteries – which are also big investors – could then buy a portion of the bonds to help the country at a time of need. German Finance Minister Wolfgang Schauble on Tuesday night told German public broadcaster ZDF that Berlin “regrets that the Cypriot parliament has rejected the program negotiated by the Euro Group and the Cypriot government, spiegel.de informs.” He then implied that the common currency area still holds all the levers. Two of the country’s largest banks, he said, are being propped up by emergency liquidity from the ECB. “Someone needs to explain this to the Cypriots,” he said, ominously.Merkel said that “of course Germany wants a solution” but added that “the current banking sector is not sustainable.” Austrian Finance Minister Maria Fekter likewise threatened an ECB funding stop. If Cyprus didn’t come up with a new plan quickly, she said, then “the banks won’t open on Friday because the ECB will not provide any more liquidity. On the other hand, U.K. is flying EUR 1 million of cash into Cyprus for British soldiers and their families who might run short on cash because of the bank chaos roiling the island nation, BBC informs.

Europe stocks recoup

European stock markets rebounded from a three-day losing streak on Wednesday, with investors digesting the latest developments in the Cyprus debt crisis, wsj.com informs. The Stoxx Europe 600 index rose 0.4 pc to 296.74, climbing back from a 0.4 pc loss on Tuesday. Trading on the Cyprus Stock Exchange was halted and banks were closed for a second day as politicians scrambled to find a solution to the country’s debt woes. Banking shares, which were among the biggest decliners in recent days’ action, recouped, with shares of Banca Popolare di Milano Scarl up 6.4 pc in Milan, Deutsche Bank AG (DB) up 1.8 pc in Frankfurt and Credit Agricole SA 1.4 pc higher in Paris. The U.K.’s FTSE 100 index traded 0.2 pc higher at 6,455.72.


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