Cyprus is facing the most serious (multi-dimensional) crisis since the Turkish invasion in 1974, as Nicosia is working for preparing its plan B, but troika seems to reject it. On the other hand Cyprus holds low profile about the discussion in Moscow, as the negotiation with Russia is difficult and time sets a pressing deadline:
Cyprus considered nationalising pension funds and ordered banks to stay shut till next week to avert financial chaos after it rejected the terms of a European Union bailout and turned to Russia for aid. Crisis talks among the political leadership in Nicosia are set to resume on Thursday after late-night meetings to discuss a “Plan B” broke up on Wednesday without result. EU officials voiced frustration but little sympathy for an ambitious but now bust banking system that extended itself well beyond the island; Russia, whose citizens have billions to lose in those Cypriot banks, called the EU a “bull in a china shop”. President Nicos Anastasiades, just a month in office and wrestling with his country’s worst crisis since the Turkish invasion of 1974 that divided Greek- and Turkish-speaking Cypriots, is due to meet party leaders at 9:30 a.m. (7:30 a.m. British time). The deputy leader of his Democratic Rally warned time was running out: “We don’t have days or weeks, we have only hours to save our country,” Averos Neophytou told reporters.
It is obvious that it is time for creative negotiations in Moscow aiming at producing mutual value and re-framing the current status of Cyprus-Russia relations not only financially, but also geopolitically:
The so-called troika of the European Commission, European Central Bank and International Monetary Fund is also set rejected Cyprus’s “plan B” which proposed raiding the country’s pension funds and turning them into government bonds to raise money to secure a bailout. Cypriot finance minister Michael Sarris, meanwhile, is in Moscow for talks with Russian officials. He told CNBC that the country hoped to get some support from Russia, saying “The discussions will last as long as it takes. We will be here until we get some agreement.” The talks sparked a rumor that Cyprus had struck a deal to sell its Popular Bank to Russian investors, but a government spokesman denied such a deal. ”The government denies reports that the Cyprus Popular Bank has been sold to foreign investors,” Christos Stylianides told Reuters in a statement, giving no further comment.
The most challenging task for Cyprus is to save its banking system and also keeping foreign deposits in the island creative negotiation approaches seem to offer the only viable alternative for meeting the challenging demand:
Cyprus has asked Russia for a five-year extension of an existing loan of 2.5 billion euro Moscow that granted the island nation in 2011. Besides that Nicosia needs a credit line of several billion euro to bail out its banks. The demands of the European creditors pledging 10 per cent deposit levy in exchange for bailout of the Cyprus economy caused panic among country’s citizens and investors. Parliament voted against the EU demand to tax all accounts registered on the country. The measure supposed to claim 6.75 per cent from accounts under 100,000 euro and 9.9 per cent from those over 100,000 euro. On Tuesday, credit rating company Fitch announced it is going to reconsider ratings of Cyprus’ three major banks: Bank of Cyprus (BOC), Cyprus Popular Bank (CPB) and Hellenic Bank (HB) if the EU-proposed tithe is introduced in the country. Cyprus Popular Bank was de-facto nationalized in 2012 after it demanded 1.8 billion euro for recapitalization. The crisis in Cyprus Popular Bank (branded Laiki at home) became one of the reasons why the Cypriot government had to address to the EU and IMF for financial support. Cyprus banking system is paralyzed since March 18. All banks will remain closed till at least the end of the week.
Finally, it is becoming clear that the solution for Nicosia has to be focused on banking financing, energy and regional geopolitics with a broader international dimension.
Cyprus is fighting for the future of the Southern European countries.