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Cyprus given deadline for bailout plan

By Catholic Online (NEWS CONSORTIUM)
March 21st, 2013
Catholic Online (www.catholic.org)

There is little time left - the tiny island nation of Cyprus has until this coming Monday to agree to a revised version of the proposed economic plan. If they fail to do so, financial collapse is certain, and it may prompt the nation to leave the euro altogether.

LOS ANGELES, CA (Catholic Online) - Cyprus' banks are being kept afloat by emergency funding from the European Central Bank. This will come to an end next week without an agreement. 

Officials have been scrambling to find ways to raise 5.8 billion since the country's parliament threw out an unprecedented plan to tax bank deposits on Tuesday. Without the money, Cyprus can't access a 10 billion rescue package offered by the EU.

Leaders of Cyprus' political parties have agreed this week to create an "investment solidarity fund," which would issue bonds backed by state and church assets.

The plan was due to be discussed by both the government and parliament this evening, but few details were available and it was not clear how much the fund would be worth.

Banks in Cyprus have been shut all week, and are not due to reopen until Tuesday next week in order to prevent customers from raiding their savings accounts. Cypriots have been lining up to empty ATMS since the proposed bank account levy was announced this past weekend.

The European Central Bank said it would continue to provide liquidity until Monday but would only consider funding beyond then if Cyprus can resolve its differences with eurozone partners and the International Monetary Fund over how to fund a rescue.

"Thereafter, Emergency Liquidity Assistance could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks," the ECB said in a statement.

Cyprus has been crippled by the losses that its oversized banking sector sustained on investments in Greece and a deep recession.

Eurozone policymakers want it to fund 5.8 billion as part of any rescue to ensure the country's debt doesn't soar to levels that are not sustainable. The total funding required to recapitalize the banks and meet government commitments is almost equal to annual gross domestic product.

The proposed tax on all bank accounts, including deposits covered by the national guarantee scheme have outraged Cypriots and has prompted widespread criticism for undermining the principle that ordinary savers should not pay for bank failures.

"I still think it is probably inevitable there will be some kind of levy in the final package which we will agree upon," Dutch finance minister Jeroen Dijsselbloem said, who chairs Eurogroup meetings of eurozone finance ministers.

"And I hope, as many members in the Eurogroup hope, that it will be a fair package in the way it addresses the burden sharing in a fair way," he said in a speech to the European Parliament.

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