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Cyprus

Cyprus scrambles to come up with 'Plan B Package'

Cyprus is scrambling to devise a 'Plan B' that would secure the embattled country a much needed bailout package. The near-bankrupt eurozone country rejected an initial plan to levy all bank deposits in the country.

Cypriot President Nicos Anastasiades met with party leaders on Thursday to try and get their backing for a newly drawn-up plan aimed at securing the much needed 5.8 billion euros ($7.5 billion) demanded by international creditors in exchange for an increased bailout package for the embattled nation.

Lawmakers are scrambling to come up with a "Plan B" after parliament on Tuesday resoundingly rejected a proposal by creditors to seize up to 10 percent of all domestic bank deposits as a means of financing the rescue package.

Nationalizing pension funds of semi-government corporations, issuing an emergency bond linked to future natural gas revenue or revised bank deposit tax for large investors were some of the new options being considered by the cabinet as a means of raising the much needed capital.

Cypriot Finance Minister Michael Sarris is in Moscow to discuss further Russia investments in the country's banks and energy resources to reduce its debt burden.

Sarris told the Reuters news agency during a second day of talks with his Russian counterpart, Anton Siluanov, that he is also looking into the option of an extension to an existing 2.5 billion euro loan from Russia. Cyprus, he added, had no plan to borrow more money from Russia.

Banks across Cyprus will remain closed for the rest of the week and will not reopen until Tuesday next week. The Cypriot stock exchange has suspended trading for Thursday and Friday.

Monday deadline

The European Central Bank (ECB) warned Thursday it is only able to provide Cyprus with emergency funding until next Monday.

"Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if a [joint European Union-International Monetary Fund] program is in place that would ensure the solvency of the concerned banks," the ECB's governing council said in a statement.

On Wednesday, ECB executive board member Joerg Asmussen made clear that Cyprus' banks could not depend on funding if Nicosia was unable to agree to a bailout plan, along with a commitment to restructuring the country's banking sector.

The ECB is only able to provide funds to banks that are solvent and their solvency would not be assured "if an assistance program for Cyprus that guarantees a rapid recapitalization of the banking sector is not agreed upon soon," Asmussen said.

Meanwhile, the head of the eurozone, Jeroen Dijsselbloem, told EU parliamentarians meeting in Brussels to discuss the financial crisis in Cyprus that the country should plan a "more fair balance" as it tries to redraft the controversial bank levy.

"The Eurogroup felt it was very important that there should be a fair burden-sharing. We were of the opinion that the burden on large deposits should be larger than on small deposits. We're still of that opinion," Dijsselblom said Thursday.

jlw/dr (Reuters, AP, AFP, dapd)

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