Cyprus hopes for russian loan church offers all its money

The island republic is heading for financial doom. The Cypriot parliament has rejected the planned compulsory levy on bank deposits. This also invalidates the international aid package put together by the euro partners at the weekend.

Innsbruck/Nicosia – Cyprus lurches ever faster toward the abyss. The parliament of the Mediterranean island rejected on Tuesday evening the controversial compulsory levy for bank customers, which is a prerequisite for aid payments of the European partners and the IMF in the amount of ten billion euros. 36 MPs voted against the levy, 19 abstained. One of the 56 people's representatives was not present. Conservative President Nikos Anastasiades' ruling party also abstained, although it had agreed to the mandatory levy in Brussels.

"We are on the verge of a disorderly bankruptcy"

The failure of the project had already become apparent in the early afternoon, when Anastasiades said that parliament would probably not support his plans. "Because they think it's unfair and against the interests of Cyprus." The meeting on the special levy, which is seen as breaking taboos in the financial markets and could derail progress in the debt crisis, had been postponed several times.

The deputy head of President Nikos Anastasiades' ruling party, Averof Neofytou, summed up Cyprus' gloomy outlook before the vote, saying, "We are on the verge of a disorderly bankruptcy." The money in the Cypriot treasury is enough according to earlier government data meanwhile still until May.

The nation's business community called it a "financial genocide" in the face of tough requirements from Brussels. Cypriot banks expected to remain closed until next Tuesday. After that, the central bank fears a rush to the counters.

Now the hopes of the Cypriots rest on Russia. According to Anastasiades' office, the president spoke on the phone with his Russian counterpart Vladimir Putin just minutes after the failed vote. The conversation lasted about 30 minutes, he said, and concerned the financial relations of the two countries. The state television (RIK) reported, both had agreed on a meeting. However, no date was given.

Church wants to mortgage assets

Following the rejection of the EU bailout package, the influential Orthodox Church in the Mediterranean country wants to make its assets available to the government. "The entire property of the church is at the disposal of the country in order to prevent a collapse of the economy," said Cypriot Archbishop Chrysostomos II. Wednesday after a meeting with President Nikos Anastasiades. The church offered to mortgage its properties to enable the purchase of government bonds.

The archbishop did not want to give concrete numbers. The Orthodox Church is the largest owner of landed property on the island and also holds shares in numerous companies. Assets are estimated at tens of millions of euros. Parliament's 'no' vote on EU bailout package sends 'strong message that we can't be fooled,' archbishop stressed.

"A question of honor to say no"

The stop of the compulsory levy in parliament puts the just elected government of President Anastasiades to the acid test. Under pressure from massive protests, the government had already weakened the one-time levy for bank customers prior to the vote. After the amendment, the law should protect assets up to 20.Spare 000 euros. Anastasiades had been trying all night to get his conservatives and opposition deputies on his course.

However, this was not enough to appease the parliamentarians. During the debate, several congressmen said it was "a matter of honor to say no". The president of the Center Party (DIKO), Marios Karogian, shouted to the parliamentarians: "We say no". And we say no for our children and grandchildren. We now have a path of suffering ahead of us, but we will get there."Outside parliament, protesters chanted, "We will not be the slaves of the 21st century. Becoming a twenty-first century mortgage." They cheered when they learned of the vote's outcome. The police had cordoned off the parliament building widely.

Desperate search for other sources of money

One lifeline could be Russia, whose citizens hold bank accounts in Cyprus in large numbers. In a desperate search for other sources of funds, Cypriot Finance Minister Michalis Sarris had flown to Moscow on Tuesday night, Cypriot state radio reported.

Sarris said he hoped that an agreement on a loan from Russia could be reached as early as Wednesday. "We hope for a good result, but we can't predict anything," Sarris said before talks with his Russian counterpart Anton Siluanov. Cyprus had asked Russia for an extension of an existing loan with a volume of 2.5 billion euros. euro for five years and a discount on the interest rate. On Tuesday evening, he denied reports of his resignation, which had caused additional turmoil in the financial markets.

Under the new bill, account holders would be charged for amounts between 20.000 euros and 100.000 euros 6.75 percent to the state. Amounts over 100.000 euros should be charged at 9.9 percent. In addition, the government wanted to make the bitter pill palatable to the account holders: There would be compensation in the form of bank shares, it said. Those who leave their money in the country for the next two years have been promised 50 percent of the amount lost in the form of options on the profits from the suspected gas deposits off the coast of Cyprus, state television reported.

The Eurogroup had conceded to Cyprus the night before to increase the allowance even to 100.000 euros to increase. But experts assumed that such a generous arrangement would not allow the government to gather the required sum of 5.8 billion euros, which europartners insist upon. (APA/Reuters/dpa/AFP/