As Cyprus works to strike a deal with the European Union and Russia, government officials said recently that the nation’s banks would remain closed into next week amid a dispute over how to fund the country’s bailout.
On Tuesday, the Cypriot parliament rejected a plan from the E.U. that would provide $7.5 billion in funding for the nation’s bailout through the taxation of bank deposits. The nation is in the process of developing a plan to access an E.U. bailout to prevent financial meltdown and bankruptcy, The Guardian reports.
The International Monetary Fund and Cyprus’ euro-zone partners have agreed to provide nearly $13 billion in bailout funds if the nation can come up with an additional $9 billion by itself. Most of the bailout funds will be required to stabilize the nation’s banking sector and the rest will go to support the government.
The Cypriot government is reportedly discussing a plan to nationalize the pension funds of semi-government firms, as well as another plan to tax deposits. Another plan includes natural gas bonds linked to hydrocarbon reserves recently discovered off the coast of Cyprus, though the possibility is uncertain because the reserves will likely not be exported until at least 2019.
“We don’t have days or weeks, we have only hours to save our country,” Averof Neophytou, the deputy leader of the ruling Democratic Rally party, said, according to The Guardian.
Because of a bank holiday on Monday, Cyprus’ banks will remain closed until Tuesday. Banks have been shut since last week to prevent a run on deposits. The government may also attempt to impose capital controls to prevent a flood of money out of the banks once they are reopened.
Russia, an ally of Cyprus, rejected the original plan to tax deposits, because nearly one-third of all deposits in Cypriot banks are held by Russians. The Cypriot government was set to engage in a second day of talks with Russia over a multibillion-dollar loan.
“We had a very good first meeting, very constructive, very honest discussion,” Cypriot finance minister Michael Sarris said, adding, however, that there were “no offers, nothing concrete,” The Guardian reports. “We’ve underscored how difficult the situation is.”
Cyprus has faced financial troubles tied to their exposure to the financial crisis in Greece, where the euro-zone debt crisis originated.