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Cyprus president in bailout battle issues 'quit' threat

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(Globalpost/GlobalPost)

Cypriot President Nicos Anastasiades warned Sunday he may be forced to quit as he battled Brussels bailout bosses, with the clock ticking on a deadline to avert bankruptcy and a potential exit from the euro.

The development was reported by the Cyprus News Agency citing sources at the presidential palace, as Anastasiades fought to unlock urgently-needed bailout cash from the big players -- the heads of the European Central Bank, International Monetary Fund, European Union and eurozone.

"Do you want to force me to resign?" the agency quoted Anastasiades as telling EU and IMF chiefs in the snow-covered Belgian capital.

"I am giving you one proposal, and you do not accept it. I give you another and it's the same. What else do you want me to do?" he was quoted as saying.

The crunch meeting was called after the ECB threatened to halt life-support funding for Cyprus on Monday if there was no deal.

The banks in Cyprus were due to re-open on Tuesday after a 10-day shutdown, although as the talks progressed, the two biggest lenders on the island slashed cash machine withdrawal limits as low as 100 euros per day.

Cyprus has agreed to break up one of these banks and move big deposits into a new "bad" bank that will see a "haircut" forced on investors whose money will likely remain tied up for years.

But Nicosia was resisting the pressure on the biggest one, the Bank of Cyprus, which holds a third of all deposits on the island.

Bailout bosses are demanding what French Finance Minister Pierre Moscovici called a "just" contribution from the very biggest depositors -- including Russian oligarchs and Moscow government agencies.

Otherwise, a promised 10 billion euros ($13 billion) of taxpayer loans would not be forthcoming, leaving Cyprus facing default and an ousting from the single currency area.

It was time to put an end to "casino economy" practices on Cyprus, Moscovici insisted.

"If we don't, it's you, it's me, it's all of us who will be left picking up the tab," he underlined.

-- 'Decision lies in Cyprus' --

German Finance Minister Wolfgang Schaeuble said the Cypriot government needed to adopt a "realistic" view, as a follow-through meeting with Eurogroup finance ministerial peers was pushed back twice already after six hours of talks.

"It's not about us -- the decision lies in Cyprus," said Schaeuble.

As Anastasiades consulted with party leaders back in Nicosia, key ministers said the overall numbers had not changed from a week ago, when an initial plan to raid all savings collapsed amid public anger.

The idea now is that only deposits over 100,000 euros, the cut-off for an EU-level insurance guarantee, are hit.

With Cyprus looking for a 17-billion euro rescue overall, that meant a rough total of seven billion to be found via the bank "haircut," a wealth tax for lesser banks, local tax changes, privatisations and other creative avenues.

"I'm expecting a long night. I think a deal will be done tonight, but it will be late," Irish Finance Minister Michael Noonan said.

"There are no longer any optimal solutions available. There are only hard choices left," EU economics head Olli Rehn warned beforehand.

He acknowledged that Cypriot leaders are trapped, after a firestorm of protest over the previous weekend's attempt to impose a blanket savings grab.

Anastasiades met first with ECB head Mario Draghi, IMF managing director Christine Lagarde, EU president Herman Van Rompuy, European Commission head Jose Manuel Barroso, Eurogroup chair Jeroen Dijsselbloem and Rehn.

The volume of Cyprus sovereign aid is a pittance compared with Nicosia's closest ally Greece, which needed hundreds of billions all told in the eurozone's first bailout begun almost exactly three years ago.

The worry, though, among some leaders and economists was that fallout from the current crisis could still infect other troubled economies like Spain and Italy.

Spanish Finance Minister Luis De Guindos said contagion could become an issue if a deal was not done soon.

The haircut would take the form of a bond or share swap in a bid to get the measure through parliament, after Cypriot lawmakers flatly rejected the levy on all deposits.

But EU sources said a problem remained over liabilities due to the ECB.

UniCredit analyst Erik Nielsen reckoned "Cyprus will cave in," although he warned of "some drainage of Cypriot deposits after the banks re-open", which would mean the ECB extending emergency financing a little.

University of Maryland professor Peter Morici said a euro exit could be to Cyprus's advantage.

"Iceland is also a financial centre but having its own currency, recovered rather quickly from a similar financial crisis."

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http://www.globalpost.com/dispatch/news/afp/130324/cyprus-president-bailout-battle-issues-quit-threat-0