Cyprus races clock to arrange bailout

NICOSIA, Cyprus Cypriot lawmakers were finalizing Friday a new plan they hope will raise enough money to qualify the country for a bailout package and help it avoid financial ruin next week.

But there has been no indication it will be enough to satisfy the country's prospective creditors, its fellow eurozone countries and the International Monetary Fund.

The package of nine laws was expected to be debated and voted on in Parliament Friday night, three days after lawmakers decisively rejected a plan that would have seized up to 10 percent of people's bank deposits.

Cyprus has been told to raise 5.8 billion euros ($7.5 billion) to qualify for 10 billion euros ($12.9 billion) in rescue loans from the eurozone and the IMF.

The country faces a pressing Monday deadline, when the European Central Bank has said will stop provide emergency funding to the country's banks it a new plan is not in place. Without the ECB's support, Cypriot banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-country euro currency union.

But eurozone officials said they had still not seen all the details and would have to discuss whatever final plan Cyprus presents.

Averof Neophytou, the deputy head of the governing DISY party, said "significant progress" had been achieved Friday after hours of haggling over a series of draft laws.

The three main bills include restructuring the country's second largest and most troubled bank, Laiki, and restricting some financial transactions once banks, which have been closed since Saturday, reopen on Tuesday.

• ECB: Cyprus has until Monday to OK bailout
• Cyprus lawmakers work on economy-saving plan
• Cyprus lawmakers reject bank tax bill

The restructuring of Laiki and the sale of the toxic-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, Neophytou said.

Another law would set up a "solidarity fund" which will be used to raise money through as yet undetermined contributions and investments.

Despite Tuesday's rejection of the deposit tax, the idea was back on the table Friday. Neophytou said discussions were continuing on what percentage of accounts above the guaranteed 100,000 euro ($130,000) limit would be seized, in exchange for bank bonds.

That will happen for deposits in Laiki, and could be extended to other banks too, including the country's largest, the Bank of Cyprus, which also took significant losses on Greek debt.

One lawmaker, who spoke only on condition of anonymity because the talks were ongoing, said the size of the deposit tax would be large enough "so that the numbers add up."

Laiki bank's acting CEO, Takis Phidias, condemned the plan. "I'm certain that there will be chaos after these bills are approved."

Phidias said the initial plan to seize deposits across all Cypriot accounts "would have more evenly shared the burden and certainly, it would have safeguarded both large banks. I'd like to believe that there's still time to carry out this negotiation."

The Bank of Cyprus said it backed the idea of confiscating some percentage of all bank deposits over 100,000 euros because there were no immediate alternatives.

The bank warned Cypriots that "a potential collapse of the banking sector could lead to the total loss of all deposits above 100,000 euros and the immediate sale of all collateral accompanying non-performing loans."

Meanwhile, Cypriot efforts to clinch a contribution from Russia appeared to have failed. Russia is a key player in the crisis as Russian depositors have parked around 20 billion euros ($25.8 billion) in the country.

Michael Sarris returned to Cyprus on Friday night after spending three days in Moscow trying to drum up support.

"We will only be ready to discuss various ways of support for that state only after the EU nations and Cyprus work out a final settlement," Russian Prime Minister Dmitry Medvedev told a news conference.

Russia's finance minister, Anton Siluanov, said the Cypriots were seeking investment from Russian companies in a Cypriot state-owned firm that will manage revenue from the island's newfound offshore gas. The Russian investors, however, were not interested.

Cyprus also offered stakes in some of its banks, but there were no takers in Moscow for that, either. Siluanov also said they were not discussing providing a new loan to Cyprus as the EU has set a debt limit for Cyprus.

Back in Nicosia, worried Laiki employees gathered near parliament for a second day to protest the bank's restructuring, which would break the lender in two. One side would take on the soured investments to allow the stronger side to survive. Depositors who have a portion of their money taken by the government would receive an equity stake in the so-called good bank.

"The bank is finished, we'll lose our jobs and I'm worried about my kids," Laiki employee Nikos Tsiangos said, standing behind barricades and a cordon of police that have blocked the way to Parliament. "They've brought us to the brink, the Europeans wanted to destroy our economy and they've done it."

Europe also turned up the pressure on Cyprus. Luxembourg's finance Minister Luc Frieden told Germany's Inforadio that Cyprus "certainly must change a very great deal in its financial sector ..... I see among some euro states little financial room for more concessions to Cyprus."