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Brussels: 'It's up to Cyprus to come up with a revised bailout deal'

The European Commission says there’s nothing else it can do if the Cypriot parliament won’t approve the bailout it offered.

EU economics commissioner Olli Rehn: The Commission has said it did not want bank balances under €100,000 to be subject to a controversial deposit levy.
EU economics commissioner Olli Rehn: The Commission has said it did not want bank balances under €100,000 to be subject to a controversial deposit levy.
Image: Yves Logghe/AP

THE EUROPEAN COMMISSION has appeared to rule out the prospect of revising the terms of the bailout it has offered to Cyprus – saying it is up to the government to find alternative measures that will not be vetoed by its national parliament.

Brussels has said the rejection of the proposed €10 billion bailout in the parliament yesterday – when not a single MP voted in favour of a deal that included an extraoirdinary levy on bank deposits – meant the ball was now in the court of the Cypriot government.

“Whilst this programme did not in all its elements correspond to the Commission’s proposals and preferences, the Commission felt the duty to support it since the alternatives put forward were both more risky and less supportive to Cyprus’s economy,” the Commission said in a statement.

This programme was not accepted by the Cypriot parliament.

It is now for the Cypriot authorities to present an alternative scenario respecting the debt sustainability criteria and corresponding financing parameters.

The statement came after Cyprus’s interior minister said the Troika had already rejected a ‘Plan B’ compromise it had tabled.

The Commission said it would have preferred if the proposed levy on bank taxes – which has prompted banks to remain closed for a third successive day, fearing a run when depositors get a chance to withdraw their savings – had not targeted balances under €100,000 at all.

The levy, which had aimed to raise €5.8 billion, would have seen 6.75 per cent taken off the balances of all bank accounts with under €100,000 on deposit, and 9.9 per cent on other accounts. The money would have been converted into bank shares and given to the account holders.

“The Commission made it clear in the Eurogroup before the vote in the Cypriot parliament, that an alternative solution respecting the financing parameters would be acceptable, preferably without a levy on deposits below €100,000,” it said.

“The Cypriot authorities did not accept such an alternative scenario.”

The proposals ultimately put to MPs yesterday would have exempted accounts with under €20,000 from the balance, but did not increase the levies at the higher end – meaning the total made under the deal would have been about €300 million short.

Cyprus is a popular offshore banking venue with cash-rich Russian investors, leading Russia to attack the proposal. Its banks have faced capital shortfalls since incurring heavy losses on Greek government bonds, which defaulted in an EU-backed move last year.

Today the Cypriot finance minister has travelled to Moscow to meet his Russian counterpart and discuss the possibility of having the €10 billion in European loans replaced with Russian investment.

Russia has already lent €2.5 billion to Cyprus, which was due to be repaid in 2016. Cyprus has been seeking an extension on its repayment dates in parallel with its separate talks on an European bailout.

Read: Cyprus minister: Troika rejects our Plan B, and banks might never re-open

More: British military plane takes €1 million to Cyprus

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Gavan Reilly

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