* Finance minister says no deal on Russian aid yet
* Parliament unanimously rejects EU-driven deposit tax
* ECB threatens to pull plug on Cyprus banks soon
* Govt orders banks to stay shut until March 26
By Michele Kambas and Lidia Kelly
NICOSIA/MOSCOW, March 20 Cyprus ordered banks to
stay shut until next week as the government scrambled on
Wednesday to avert a financial meltdown after rejecting the
terms of a bailout from the European Union and turning instead
to Russia for a lifeline.
"We don't have days or weeks, we have only hours to save our
country," Averos Neophytou, deputy leader of the ruling party
Democratic Rally, told reporters as crisis talks in Nicosia
dragged into the evening. Banks are to stay shut for the rest of
the week and so not reopen till Tuesday after a holiday weekend.
With Finance Minister Michael Sarris in Moscow, Russia's
finance ministry said Cyprus had sought a further 5 billion
euros, on top of a five-year extension and lower interest on an
existing 2.5-billion euro loan from Moscow. Russia has a special
interest, since many of its citizens keep savings in Cyprus.
In a vote on Tuesday, the island's tiny legislature threw
out a proposed tax on bank deposits in exchange for a 10-billion
euro bailout from the EU, a stunning rejection of the kind of
strict austerity accepted over the past three years by
crisis-hit Greece, Portugal, Ireland, Spain and Italy.
Facing the prospect of a run on banks, a government official
said lenders would remain shut on Thursday and Friday, leaving
next Tuesday, March 26, the next normal working day. Greece said
Greek branches of Cypriot banks would also stay shut there.
Businesses in Cyprus are already feeling the pinch, with
people reduced to limited withdrawals from cash machines. The
island's banking sector has been crippled by its exposure to
bigger neighbour Greece, where Europe's debt crisis began.
The European Central Bank's chief negotiator on Cyprus,
Joerg Asmussen, said the ECB would have to pull the plug on
Cypriot banks unless the country took a bailout quickly.
"We can provide emergency liquidity only to solvent banks
and ... the solvency of Cypriot banks cannot be assumed if an
aid programme is not agreed on soon, which would allow for a
quick recapitalisation of the banking sector," Asmussen told
German weekly Die Zeit in an interview late on Tuesday.
Cypriots had balked at EU demands for a levy on bank
deposits to raise 5.8 billion euros, an unprecedented measure
that opponents said would have violated the principle behind an
EU-wide guarantee on deposits of up to 100,000 euros.
Cyprus Energy Minister George Lakkotrypis was also in
Moscow, officially for a tourism exhibition, but fuelling talk
that access to untapped offshore gas reserves could be on the
table as part of a deal for Russian aid.
"We had a very honest discussion. We've underscored how
difficult the situation is," Sarris told reporters after talks
with his Russian counterpart Anton Siluanov in Moscow.
"We'll now continue our discussion to find the solution by
which we hope we will be getting some support," he said.
"There were no offers, nothing concrete."
Moscow has its own interests in ensuring the survival of
banks in Cyprus, a haven for billions of euros squirreled abroad
by Russian businesses and individuals - a factor, too, in the
reluctance of Germany and other northern euro zone states to
bail out Cypriots without a contribution from bank depositors.
Speculation was rife over the shape Russian help might take.
Government spokesman Christos Stylianides denied a Greek media
report that Cyprus had reached a deal for Russian investors to
buy the island's second largest bank, Cyprus Popular,
which was taken over by the state last year.
The proposed levy on deposits would have taken nearly 10
percent from accounts over 100,000 euros. Smaller accounts would
also have been hit, although the government proposed softening
the blow to spare savers with less than 20,000 euros.
German Chancellor Angela Merkel, whose country is Europe's
main paymaster, said it was up to the Cypriot government to come
up with an alternative proposal but it was fair to expect those
with savings over 100,000 euros - the normal limit for state
deposit insurance - to contribute to a bailout.
The EU has a track record of pressing smaller countries to
vote again until they achieve the desired outcome.
Nicosia was eerily quiet on Wednesday, and there was
evidence the bank closure was slowing trade.
"Things won't be so bad as long as people can withdraw from
ATMs but if they go too there will be a huge problem," said
Titos Pitsillides, 50. Several petrol stations were refusing
credit cards, insisting on payment in cash.
Government spokesman Christos Stylianides said a "Plan B"
was in the works.
President Nicos Anastasiades, a conservative elected just
last month with a mandate to secure a bailout, held meetings
with party leaders, his cabinet and officials from the "troika"
of lenders from the EU, ECB and International Monetary Fund.
While taxing even small savers was politically explosive,
the Cypriot government had balked at sparing them by imposing a
higher tax on big depositors - fearing for an offshore banking
business that accounts for a big share of its economy.
Lawmaker Marios Mavrides told Reuters one option under
discussion was to nationalise pension funds of semi-government
corporations, which hold between 2 billion and 3 billion euros.
An opposition politician present at Wednesday's crisis talks
said: "The idea is we can get the pension funds of organisations
like the Cyprus Telecoms Organisation and the Electricity
Authority, maybe some others as well, and raise two to three
"If we raise half of the money then maybe we could top up to
the 5.8 billion euro amount by passing the Cypriot banks into
The crisis is unprecedented in the history of the divided
east Mediterranean island of 1.1 million people, which suffered
a war with Turkey and ethnic split in 1974 in which a quarter of
its population was displaced. The Turkish-populated north
considers itself a separate country, recognised only by Turkey.
While Brussels has emphasised that the tax measure was a
one-off for a country that accounts for just 0.2 percent of
Europe's output, fears have grown that savers in other, larger
European countries might be spurred to withdraw funds.
With Sarris and Lakkotrypis in Moscow, there was mounting
speculation that Russian oil and gas giant Gazprom had
mooted its own assistance plan in exchange for exploration
rights to Cyprus's offshore gas deposits.
"We at Gazprom did not offer Cyprus anything," Gazprom's
spokesman, Sergei Kupriyanov, said.
A senior source in the "troika" said dealing with Cyprus was
even more frustrating than protracted wrangling with Greece.
"The Greeks wanted to cheat on you all the time, but they
knew what they wanted," the source told Reuters.
"The Cypriots are leaving us really confused."