Cyprus debt crisis: ‘Solidarity fund’ bid in place

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THE Cypriot parliament last night adopted laws creating a “solidarity fund” to pool state assets as the basis for an emergency bond issue and to give the government power to impose capital controls on banks.

The steps were part of a package of measures to satisfy international lenders as the island races to clinch a 
€10 billion (£8.5bn) bailout from the European Union and avert bankruptcy.

The Mediterranean island is looking for a way to raise €5.8bn to qualify for rescue loans from other eurozone countries and the International Monetary Fund.

But the plan needs approval from the eurozone and IMF and that remained elusive with officials in Brussels and Berlin giving no indication that it would be enough.

Eurozone officials said they had not seen all the details and would have to discuss whatever final plan Cyprus presented.

“The next few hours will determine the future of this country,” said a government spokesman.

Cyprus has had to come up with the new plan after politicians rejected a scheme that would have seized up to 10 per cent of deposits from all individual accounts held by the island’s banks.

The country needs to have the plan in place by Monday, when the European Central Bank has said it will cut off emergency support to the banks. That could trigger their collapse and devastate the economy, potentially pushing Cyprus to leave the 17-country currency union.

“We are trying very hard,” Averof Neophytou, deputy leader of the ruling Democratic Rally party, said about the progress of talks. “We may have a result this day.”

As part of the package, politicians were considering restructuring the country’s second-largest lender, Laiki, which suffered big losses on Greek debt investments.