The European Union recently told the struggling nation of Cyprus it has until Monday to raise the required amount of money towards its own bailout or face a liquidity cut-off from the European Central Bank.
“Thereafter, Emergency Liquidity Assistance could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks,” the ECB said, according to Reuters.
The Cypriot government sought on Thursday to implement capital controls to prevent a flow of money leaving the nation if it cannot reach a deal with EU officials before banks reopen on Tuesday. The nation has struggled to develop a plan to raise the $6.5 billion required by the EU in return for nearly $13 billion in bailout funds from the ECB and International Monetary Fund.
A senior EU official said that the cooperative was prepared to force Cyprus to abandon the euro in an attempt to prevent damage to the broader European economy, Reuters reports.
Additionally, a senior EU official said an ECB withdrawal from the proposed bailout would result in the winding down of Cyprus’ largest banks.
“If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency,” the official said, according to Reuters.