Mad scramble to save Bank of Cyprus

Thousands of bank workers demonstrating in Nicosia yesterday (AFP)

THERE were mixed reports last night concerning the island’s bailout, with one report suggesting a deal had been struck while another said Cyprus and international lenders were not even close to an agreement.
There was no official confirmation of either report by the time the Cyprus Mail went to print.
Earlier, Reuters reported Cyprus had conceded to a one-off levy on deposits over €100,000 to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse.
Quoting an unnamed senior government official, Reuters said Nicosia had agreed with EU/IMF lenders on a 20 per cent levy over and above €100,000 at No. 1 lender Bank of Cyprus, and four per cent on deposits over the same level at other banks.
However, an hour or so later, the Cyprus News Agency, also quoting an unnamed Cypriot official, said the two sides were not even close due to the stance of the IMF, which tabled new demands “every half an hour”.
Reports suggested the troika were focusing on the resolution of the Bank of Cyprus.
Earlier yesterday, Finance Minister Michalis Sarris, reported "significant progress" in talks with international lenders, with the clock running down to an end of Monday deadline for Cyprus to clinch a bailout deal with the EU or lose emergency funding for its stricken banks and risk tumbling out of the eurozone.
His counterparts in Europe’s 17-nation currency union scheduled talks in Brussels for Sunday evening to see if the numbers add up, and the EU's Economic Affairs Commissioner Olli Rehn said progress was being made towards a solution.
Talks with the lenders continued at the presidential palace before a meeting between President Nicos Anastasiades and party leaders.
Anastasiades tweeted in the afternoon: "We are undertaking great efforts. I hope we have a solution soon."
The DISY leader was due to lead a delegation to Brussels, also today, to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near.
"Hopefully by tomorrow in Brussels we will have the agreement of our partners," Averof Neophytou, DISY deputy chairman, told reporters.
Government officials held talks through the day at the finance ministry with Cyprus' 'troika' of lenders - the EU, ECB and IMF. Angry bank employees demonstrators outside chanted "resign, resign!"
Sarris said yesterday talks with the troika were centred on a possibly levy of around 25 per cent on savings over and above €100,000 at failing Bank of Cyprus.
In a sign of how fluid the situation remains, however, a senior ruling party lawmaker said other options were on the table, including a "voluntary haircut" in exchange for equity that would not require parliamentary approval.
The EU's Rehn said the bloc recognised the progress made by the Cypriot government, and warned of tough times ahead.
"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available," he said in a statement. "Today, there are only hard choices left."
It was far from certain that a majority of lawmakers would back a revised levy, or whether the government might bypass the assembly.
Racing to placate its European partners, Cypriot lawmakers voted in late-night session on Friday to split failing lenders into good and bad banks - a measure likely to be applied to No.2 lender Cyprus Popular Bank, or Laiki.
They also gave the government powers to impose capital controls, anticipating a run on banks when they reopen on Tuesday.
A plan to nationalise semi-state pension funds has met with resistance, particularly from Germany which made clear that tapping pensions could be even more painful for ordinary Cypriots than a deposit levy.
The senior official who told Reuters of the levy agreement said the pension funds would not be part of the package to seal the bailout.
Under the latest proposal, Russians are unlikely to be hit hardest by the mooted per cent tax, given that just five percent of deposits at Bank of Cyprus come from Russia, according to the bank's latest results statement.
The board of the Central Bank of Cyprus was likely to hold its first meeting in almost a fortnight on Sunday, a source with direct knowledge of the meeting told Reuters, in another sign a deal may be close.
Asked about the new plan for a possible 25 per cent levy, Finnish Prime Minister Jyrki Katainen, whose country is allied with Germany in taking a hard line on Europe's debt-laden southern flank, replied in English:
"If it was like this, I think it might be quite suitable because it means that the highest deposits will be taxed."