Politicians in Cyprus were racing Saturday to complete an alternative plan raising funds necessary for the country to qualify for an international bailout, with a potential bankruptcy just three days away.
Finance Minister Michalis Sarris said "significant progress" had been made, and that new legislation raising funds could be completed and submitted to Parliament as early as Saturday evening, although the timing was not certain.
Cyprus has been told it must raise €5.8 billion in order to secure €10 billion in rescue loans from other European countries that use the single currency, and from the International Monetary Fund. The country's lawmakers soundly rejected an unpopular initial plan that would have seized up to 10 percent of people's bank accounts, and is now seeking a way to raise the desperately needed money.
Time is running out fast. The European Central Bank has said it will stop providing emergency funding to Cyprus' banks after Monday if no new plan is in place. Without ECB's support, Cypriot banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-nation eurozone.
Banks have been shut all week while the plan is put into place, and are not due to reopen until next Tuesday.
Representatives of the IMF, ECB and European Commission -- collectively known as the troika -- met with Sarris and other officials in the Finance Ministry throughout the morning, negotiating several new laws, including a crucial bill that would impose some form of a tax on bank deposits.
The details were still being worked out, but officials have said that the tax could apply to deposits in the country's top two lenders, which were most exposed to bad Greek debt, or even all banks.
Troika consent is essential as they will determine whether the plan that the Cypriots come up with would meet the requirements for the bailout before it is presented to the eurozone finance ministers for final approval.
Eurogroup meeting in Brussels expected
A eurogroup meeting of the finance ministers is expected to be held in Brussels over the weekend, and Cyprus President Nicos Anastasiades was also to fly there, potentially as early as Saturday.
"Significant progress has been made toward an agreement at least with the troika which will report to the Eurogroup," Sarris told reporters after the initial morning meeting at his ministry.
"Two or three issues need further work, issues on banks, there are different calculations," Sarris said. "There is the contribution of experts from the private sector."
The experts would hold consultations amongst themselves and officials would resume negotiations with the troika again later Saturday afternoon.
Experts trying to 'iron out the details'
"We have a number of experts that are working from the private sector, at the Central Bank, at the Ministry of Finance trying to iron out these details so that when we do reach an agreement there will be no room for different understanding or misrepresentation."
Nicosia made a significant step towards cementing a new plan Friday night, when its lawmakers approved nine bills, including three crucial ones that will restructure ailing banks, restrict financial transactions in emergencies and set up a "solidarity fund" that will act as the vehicle for raising funds from investments and contributions.
The bank restructuring will include the country's troubled second largest lender, Laiki, which suffered heavy losses after being exposed to toxic Greek debt.
The restructuring of Laiki and the sale of the toxic-asset laden Greek branches of Cypriot banks is expected to cut the amount the country needs to raise to about 3 billion euros instead of 5.8 billion euros, officials have said.
Other banks may also be included in the restructuring, such as the country's largest lender, Bank of Cyprus, which was also exposed to Greek debt.
"We have to be clear to protect the financial system and for banks to open Tuesday with a clear picture," Sarris said.
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