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No Russian Aid for South Cyprus

22 March 2013

Finance Minister Michael Sarris has left Russia to return home this morning.

In a hastily convened press conference, he stated that it had not been possible to make any deals with Russia.

Further news is that one of the 9 emergency bills submitted to Parliament today involves the restructuring of the two largest banks, Bank of Cyprus and Laiki bank, where in essence the larger deposits of 100,000 euros or more will be hived off into a ‘bad’ bank. These assets, presumed to be mainly Russian, will then be subject to a swingeing bank levy. Some say this levy may reach up to 40%.

Other bills will impose strict capital controls to deter a run on the banks. This will affect the up to 60,000 British residents in South Cyprus. Currently a cash withdrawal limit of 260 euros per day applies at cash machines.

Eurozone finance ministers will then review the laws passed today. However they are adamant that South Cyprus needs to reduce its bank debt by 6 billion euros no matter how it is done. Without that there are no bail-out funds or liquidity support and Cyprus would tumble out of the euro.

Last night Standard & Poor’s credit rating agency cut Cyprus credit rating to CCC, two notches above default.

The House of Representatives convenes this morning to discuss and vote on the nine bills prepared by the Government to armour the banking system and prevent a mass outflow of deposits.

The House delayed its extraordinary Plenary session for today at 10.00 local time (08.00 GMT), asking for more time to study the lengthy bills.

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