Keeping You Abreast – What is going on in Cyprus?

We know only too well the issues with raising capital to match IMF funding in Ireland, and Cyprus is now going through the eye of their own storm.

By Declan Whooley

There were widespread fears when proposed levies that would have seen a 10 per cent tax on large savings accounts, many of which are held by Russians and non-nationals, essentially steal money from bank depositers.

The reason is quite simple. Cypriot banks must come up a contribution towards the rescue package to shore up the country’s oversized banking sector. That figure is in the region of €7 billion and they are looking at all options.

With the €5.8 billion proposal of taking a portion from deposit accounts rejected by every lawmaker, Cyprus has become the first country to reject the conditions for EU assistance, after three years in which politicians in Greece, Ireland, Portugal, Spain and Italy all accepted biting austerity measures to secure aid.

Rejection of the key condition for a €10 billion bailout has cast the 17-nation currency bloc into uncharted waters, but German Chancellor Angela Merkel has signalled a readiness to engage with Cyprus. Well, she would say that wouldn’t she?

Cyprus has ordered its banks to remain closed until next week because the ECB will not provide any more liquidity and some have suggested that Russia may well get involved in the rescue package which will come as little surprise given their vested interest in the country.

Indeed the Cypriot finance minister Michael Sarris spoke today to Russia about help to avert a financial meltdown, with talks expected to continue into the weekend.

The term ‘crunch’ gets a little overused whenever any political discussions take place in the EU, but these really are some critical meetings concerning Cyprus which will have far-reaching consequences for the EU.

In association with Supermacs, the home of the chicken breast sandwich.