Cyprus parliament continues bailout talks after passing banking reforms

Cyprus parliament has voted to restructure the island’s banks, set up a “national solidarity fund”, and establish capital controls to prevent a bank run.

Efforts continue to reach consensus on other key issues such as levies on bank deposits.

Cypriot President Nicos Anastasiades is to hold talks in Brussels with the EU before Cyprus’s parliament reconvenes.

Cyprus needs to raise 5.8 billion euros ($7.5 billion) to qualify for a 10 billion-euro bailout.

On Friday, the Cypriot parliament passed a total of nine bills, covering three main elements of the rescue plan including:

• Restructuring of the banking sector, starting with the most troubled bank of all – Laiki (Popular) Bank, the country’s second largest
• The creation of a solidarity fund: nationalizing pension funds and other state assets
• The approval of capital controls to prevent large fund withdrawals out of Cyprus

The bank levy issue may come before parliament later in the weekend. A levy, possibly of around 15%, on all deposits over 100,000 euros, has been suggested.

The “solidarity fund” would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.

These include future gas revenues and some pension funds – an idea that German Chancellor Angela Merkel has strongly condemned.

Under the bank restructuring, Cyprus’ troubled lenders will be split into so-called good and bad banks.

Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.

Eurozone finance ministers have called a meeting on Sunday to discuss the Cyprus crisis.

The European Central Bank has given Cyprus until Monday to raise the bailout money, or it says it will cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.

The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.

Cyprus banks have been closed since Monday and many businesses are only taking payment in cash.