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ECB gives Cyprus ultimatum

Cypriots line-up at ATM machine.

Cypriots line-up at ATM machine.

NICOSIA — The European Central Bank gave Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its banks and inevitable collapse.

The ultimatum came as the island’s leaders struggled over a “Plan B” to try to raise ‚5.8 billion demanded by the EU under a ‚10 billion rescue, after angry lawmakers threw out a tax on deposits as “bank robbery”.

The government said party leaders had agreed to create a “solidarity fund” that would bundle state assets as the basis for an emergency bond issue, but parliament speaker Yiannakis Omirou insisted a revised levy on larger bank deposits, many of them held by Russians, was not on the table.

The European Central Bank, which has kept Cyprus’s banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

“Thereafter, Emergency Liquidity Assistance could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks,” it said.

Cyprus’s central bank governor said he expected to clinch a financial support package by then. He did not say how.

The government has ordered banks to stay closed until Tuesday. The stock exchange also suspended trading for the rest of the week.

There were long queues at some bank branches in Nicosia as staff replenished cash machines, which have continued to operate while banks have been closed since last week.

In Moscow, Cypriot Finance Minister Michael Sarris said he was discussing possible Russian investments in the island’s banks and energy resources to reduce its debt burden, as well as an extension of an existing ‚2.5-billion Russian loan.

Russian citizens have billions of euros to lose in the island’s outsized, teetering banking sector.

“The banks are the ultimate objective in any support we get, so it’ll either be a direct support to the banks or the support that we get through other sectors will be channelled to the banks,” Sarris told Reuters during a second day of talks with his Russian counterpart, Anton Siluanov.

He said Cyprus had no plans to borrow more money from Russia and add to its debt mountain. The Russian Finance Ministry had said on Monday that Nicosia sought an extra ‚5-billion loan. (Reuters)

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