According to a report in the ‘Financial Times’, EU officials have already turned down proposals in Cyprus’s plan B. The plan is to split Cyprus’s second largest bank into two sectors, one ‘good’ and one ‘bad’; the larger deposits, over 100,000 euro being placed in the ‘bad’ sector. Deposits up to 100,000 euro would be safeguarded, as would bank jobs.
However, several of the elements in the plan, for example, nationalising the state pension fund to raise 2 billion euro and issuing bonds based on future revenues from the gas deposits offshore as collateral, were completely dismissed by Brussels and Berlin.
Angela Merkel, German chancellor, told the Greek Cypriot government that the nationalisation of Cyprus’s pension funds was not acceptable.
Under the so-called “Plan B,” Cyprus would abandon the controversial bank levy and instead attempt to raise its 5.8 billion euro share of the bailout through a fund based on a portfolio of government assets.
It is this plan that has reportedly been rejected by the troika, comprised of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). Cyprus’ receipt of a 10 billion euro emergency loan from the European Stability Mechanism, the euro-zone bailout fund, has been made contingent on Nicosia coming up with almost 6 billion euro on its own.
The fund it designed to do so would include money from the Orthodox Church, pension funds and other institutions that would back government bonds that would then be issued. The Cypriot central bank is also expected to contribute to the fund with its gold reserves.