Cyprus works on Plan B to stave off bankruptcy

Parliament rejected proposal to tax people's bank savings Tuesday

Following the talks with President Anastasiades, right, the head of Cyprus' influential Orthodox church Archbishop Chrysostomos II, left, said on today that he will put the church's assets at the country's disposal to help pull it out of a financial crisis.

NICOSIA, Cyprus  — The Cypriot government and the country's central bank were working today on an alternative proposal to stave off bankruptcy, a day after Parliament rejected an initial plan to raise billions of euros by seizing up to 10 percent of people's bank savings.

Tuesday's decisive rejection of the plan to take a slice of all deposits above 20,000 euros has left the country's bailout in question and fueled fears that the Cypriot economy is on the cusp of bankruptcy — and could potentially have to leave the euro.

That scenario that could roil global financial markets as well as endanger deposits in the country even further.

Government spokesman Christos Stylianides said a meeting was underway at the central bank to discuss an alternative plan for raising funds, but also for reducing the 5.8 billion euros ($7.5 billion) that must be found domestically.

President Nicos Anastasiades was also meeting with the representatives of his country's potential creditors — the International Monetary Fund, European Central Bank and European Commission. The three, collectively known as the troika, must sign off on any Plan B the Cypriots come up with if it is to be approved as part of the bailout.

Under the initial plan conceived in Brussels last weekend, other eurozone countries and the IMF would give Cyprus 10 billion euros in rescue loans if the country raised 5.8 billion euros through a bank deposit seizure.

The bank's deputy governor, Spyros Stavrinakis, said no decision had been taken on when banks, which have been shut since the weekend, would reopen, and that a new plan has not yet been presented to the country's euro partners and IMF.

The banks remained shut for the third day running to avoid a bank run, and there are growing expectations they may not reopen until next week — certainly not until Cypriot authorities come up with a credible financial package that has the troika's blessing.

The package must also win approval from lawmakers.

In a two-pronged approach to the crisis, Finance Minister Michalis Sarris was in Moscow for meetings with his Russian counterpart. Russia could play a key role in any alternative package that may emerge. Russians are believed to account for just under a third of Cyprus's 68 billion euro bank deposits.

“We will be here until some kind of agreement is reached,” Sarris said.

In Nicosia, residents waited anxiously to see what lay in store for them.

Avetis Bahcecian has been running his Armenian restaurant in Nicosia for years. Now, with the uncertainty swirling around Cyprus, he's worried about his business.

“Whatever they do, they have to do it quickly because this uncertainty is hurting business,” the 41-year-old said as he kneaded dough to make lahmacun, a traditional Armenian pizza-style food. “Our business is down by 40 percent in the last couple days.”

ATMs have been dispensing cash and debit and credit cards have been working, so Cypriots have not faced any immediate cash shortage for day-to-day living.

A Cypriot financial official said authorities were working on bills which would need parliamentary approval aiming to limit the amount of money leaving the country, and that a decision would be announced later on how long the banks would remain closed. The official spoke on condition of anonymity as they were not authorized to release the information.

A government official said an alternative plan to raise the 5.8 billion had been drafted and was to be presented to the troika, most likely today. The plan would raise money from domestic sources, including pension plans and subsidiaries of foreign banks active in Cyprus.

One of those domestic sources may be the country's influential Orthodox church.

Its head, Archbishop Chrysostomos II, said he would put the church's assets at the country's disposal, saying the church was willing to mortgage its assets to invest in government bonds. The church has considerable wealth, including property, stakes in a bank and a brewery.

“The wealth of the church is at the disposal of the country,” Chrysostomos said after meeting with Anastasiades early today.