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                   Cypriot Leaders Continue Debt Negotiations

   by VOA News

   Cypriot officials are meeting again Thursday to try to come up with an
   alternate plan to raise $7.5 billion to avoid a debt default, after
   lawmakers rejected a proposal to tax citizens' savings accounts by up
   to 10 percent, earlier this week.
   The money is essential to securing emergency funding from the European
   Union to prevent bankruptcy.
   The European Central Bank warned Thursday that it will cut off
   emergency funding to Cyprus, if a new plan is not agreed upon by
   Monday.
   Banks are staying shut this week to prevent panicked investors from
   withdrawing their funds.
   Meanwhile, Cypriot Finance Minister Michael Sarris is in Moscow trying
   to hammer out a deal with Russian authorities to borrow $6.5 billion
   and get lower interest on an existing loan of $3 billion. He said
   Thursday that officials are discussing options involving the banking
   and energy sectors.
   Cypriot leaders are faced with no obvious way to raise $7.5 billion the
   country's international lenders are demanding before they will approve
   $13 billion in rescue funds. On Tuesday, the country's parliament
   overwhelmingly rejected a tax on bank deposits that angered savers.
   The Nicosia government says the country's banks, closed all week, will
   remain shut until next Tuesday, to prevent a run on accounts.
   Europe is pressuring Cyprus to offer new solutions to the island
   nation's debt crisis.
   The European Commission, the administrative arm of the European Union,
   says it is up to Cyprus to offer "an alternative scenario."
   The parliament vote left the fate of the bailout in question and raised
   the possibility that the Cypriot government could default on its
   financial obligations or even end its membership in the 17-nation euro
   currency union.
   If it eventually secures a bailout, Cyprus is planning on using much of
   the money to refund its beleaguered banks that have been weighed down
   with losses on Greek government bonds that were reduced in value to
   help resolve the Athens debt crisis.
   The original Cyprus debt terms were set by the International Monetary
   Fund, the European Central Bank and the country's eurozone neighbors.
   It calls for the tiny country to impose what the lenders said was a
   one-time tax on bank deposits -- nearly 10 percent on the largest
   accounts above $130,000.
   The proposal drew the immediate ire of Cypriot depositors, as well as
   Russian President Vladimir Putin. Wealthy Russians have vast sums
   parked in Cypriot accounts.
   The Cypriot economy accounts for only a small fraction of the
   eurozone's economic fortunes, but none of the previous bailouts for
   Greece, Portugal, Ireland and the Spanish banking system taxed savings.
   Some analysts say they fear that taxing deposits in Cyprus could set a
   precedent that might be followed in other debt-ridden countries in the
   currency bloc and ignite a run on banks to withdraw money.
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   [1]http://www.voanews.com/content/cypriot-leaders-continue-debt-negotia
   tions/1625742.html

References

   1. http://www.voanews.com/content/cypriot-leaders-continue-debt-negotiations/1625742.html