Cyprus in last ditch effort to save economy

Cypriot President Nicos Anastasiades, seeking a last-minute reprieve from financial meltdown at talks in Brussels on Sunday, has a "very difficult task" ahead of him if he is to save the island's economy, a government spokesman said.

With Cyprus facing a deadline on Monday to avert a collapse of its banking system and potential exit from the eurozone, late night talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up without result.

Anastasiades then headed to Brussels in a private jet sent by the European Commission to continue the talks ahead of a crunch meeting of eurozone finance ministers at 6 pm local time.

The president and his team have a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord", the spokesman said.

The day of talks could prove critical - not only for the future of the small island country, but also for the 17-nation eurozone. If Cyprus or its banks were to collapse, officials fear that a lack of confidence could spread to other countries that use the euro, triggering higher borrowing costs or capital flight from those countries.

Cyprus is racing to meet a Monday deadline to come up with a plan to raise 5.8 billion euros ($7.5 billion) in order to get the bailout from the other European countries that use the single currency, as well as from the IMF.

'Only hard choices left'

Underlining the gravity of Cyprus' position, the EU's economic affairs chief said there were now "only hard choices left" for the latest casualty of the eurozone crisis.

The government statement said talks were at "a very delicate phase" and deadlines were very tight.

The Cyprus government's tone jarred with earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from the island's "troika" of international lenders, the EU, IMF and European Central Bank.

Cyprus' overgrown banking sector has been crippled by exposure to crisis-hit Greece.

Without a deal on Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the eurozone.

Scrambling to find the funds, officials said Cyprus had conceded to a one-time levy on bank deposits more than 100,000 euros, a dramatic U-turn from five days ago when lawmakers angrily threw out a similar proposal as "bank robbery".

Reuters-AP

(China Daily 03/25/2013 page11)