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Cyprus government introduces emergency bailout legislation in parliament
Acting under an ultimatum by the European Central Bank that emergency liquidity will be provided only until Monday, the Cypriot government on Thursday night introduced an emergency legislation in the parliament related to a bailout deal with international lenders.
Parliamentary party leaders decided to put off the debate on a total of nine bills for 12 hours to Friday morning.
The legislation includes a bill providing for an "Investment Solidary Fund" though which the government expects to raise 5.8 billion euros set as a condition by international lenders for a bailout for the eastern Mediterranean island worth 10 billion euros.
Another bill provides for the consolidation of the second largest Cypriot lender, Cyprus Popular Bank. Central Bank governor Panicos Demetriades said that without consolidation measures asked for by the Eurogroup the bank would face immediate bankruptcy.
The government also introduced a legislation setting limits to the amounts depositors can withdraw when banks reopen on Tuesday after a week-long bank holiday decreed by the ministry of finance.
In making the announcement about the consolidation bill, Demetriades said resolution measures will be imposed on Cyprus Popular Bank so that it will be in a position to continue offering banking services to its clients when banks re-open on Tuesday next.
The decision to postpone the discussion on the bills came as thousands of demonstrators gathered outside the parliament to voice concerns over the implications of the bank's meltdown. The demonstrators included hundreds of Popular Bank employees who are worried about their jobs as well as thousands of depositors and holders of bank bonds.
Demetriades did not elaborate on the consolidation plan, but Central Bank spokesman Aliki Stylianou had earlier said that under the scheme worked out deposits in the bank of up to 100,000 euros, along with good loans and some other assets will be transferred to the Bank of Cyprus.
Cyprus Popular Bank will keep the bad portfolios and deposits of over 100,000 euros and will try to negotiate repayment of bad loans by offering incentives to debtors.
A teleconference of Eurogroup finance ministers on Thursday night called for deposits below 100,000 euros to be fully guaranteed.
The Eurogroup also said the Eurozone is ready to discuss new proposals by Cyprus in the context of a bailout program following a rejection by the Cypriot parliament of a levy on bank deposits.
[Source: Xinhua, Nicosia, 21Mar13]
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