Default approaches and Cyprus could say goodbye to the Eurozone. Instead of making progress, the island's crisis is getting more and more complicated. Finance Minister Michalis Sarris left Moscow, where he arrived on Tuesday to ask for help. No way: "Russia cannot grant us a loan because the amount of credit would make our debt unsustainable," Minister Sarris told Cypriot state television yesterday, adding that there is "limited optimism" at the moment. on the possibility of finding a formula to avoid crack.
There were two requests from Cyprus to Russia: the extension of the 2,5 billion euro credit received two years ago (which expires in 2016), complete with a reduction in the interest rate (now at 4,5%), and another five billion loan. Nicosia would have offered in exchange a share in its undeveloped offshore gas reserve (in recent days there had been talks of Gazprom and Rosneft as active parties in the operation), but the Russian authorities have denied any interest from the Kremlin in this sense. Rumors had also circulated about Moscow's possible interest in acquiring Banca Laki (People's Bank of Cyprus) and other institutions, in exchange for concessions for a port to be allocated to the Russian fleet (Cyprus is a strategic node a few kilometers from the Syrians). But all these projects fell through. Russian Finance Minister Anton Siluanov confirmed that the negotiations are over: Moscow is not interested in Cyprus's proposals.
In Nicosia all that remains is to try the path of a plan B, but this path too appears full of obstacles. The most concrete hypothesis is the creation of a "solidarity fund" to raise 5,8 billion euros, i.e. the sum missing from the appeal to unblock the international loan allocated by the European Union and the IMF (a 10 billion credit to recapitalize the disproportionate Cypriot banking sector, which is eight times the size of the island's GDP).
The Cypriot Parliament was supposed to give the green light to the fund this morning, but the session was postponed to allow the Finance Committee to review the bills intended to recover the necessary money.
To avoid the forced maxi-levy rejected by Parliament on Tuesday, various hypotheses have been put forward: the nationalization of the pension funds of public and para-state companies; the expropriation and sale of assets in the hands of the Orthodox Church; the issuance of debt guaranteed by future proceeds from the exploitation of energy resources; the merger of the country's two largest lenders to reduce the need for recapitalization.
At the moment it's just about projects, but time is running out. The European Central Bank issued an ultimatum yesterday, saying it will guarantee Cyprus the current level of emergency liquidity only until next Monday. Unless a solution is found in the meantime.
Meanwhile, rating agency Standrd & Poor's cut the island's rating from CCC+ to CCC, maintaining a negative outlook.
