23 Mar 2013

Cyprus MPs approve bailout measures

2:29 pm on 23 March 2013

MPs in Cyprus have voted to restructure the Mediterranean island's banks - one of several measures to ease a financial crisis which has hit eurozone confidence.

On Friday they also approved a "national solidarity fund" and capital controls to prevent a run on banks.

Cyprus needs to raise €5.8 billion to qualify for a €10 billion bailout by the European Union and International Monetary Fund, after parliament rejected an earlier deal.

MPs did not vote on key measures - involving levies on bank deposits. They rejected similar moves on Tuesday. A decision on this is now expected over the weekend, the BBC reports.

The "solidarity fund" would allow the pooling of state assets for an emergency bond issue. These include future gas revenues and some pension funds - an idea that German Chancellor Angela Merkel has strongly condemned.

Under the bank restructuring, Cyprus' troubled lenders will be split into "good" and "bad" banks.

Eurozone finance ministers have called a meeting on Sunday to discuss the Cyprus crisis.

The European Central Bank has given Cyprus until Monday to raise the bailout money, or it says it will cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.

The EU has postponed next week's summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.

Banks on the island have been closed since Monday and many businesses are only taking payment in cash.

Earlier, German Chancellor Angela Merkel warned that eurozone partners are running out of patience, while Moscow has rebuffed requests from Cyprus for assistance to save its banks in which Russians have billions of euros at risk.

In another development, Greek Finance Minister Yannis Stournaras announced that a Greek banking group had begun acquiring the Greek units of Cypriot banks. The measure would safeguard all the deposits of Greek citizens in Cypriot banks.

Hundreds of protesters held a vigil outside parliament in the capital Nicosia on Friday.