Germany’s finance minister is warning that banks in Cyprus may never reopen as the Cypriot finance minister headed to Moscow seeking financial help.
The Cypriot parliament rejected a 10 billion-euro ($13 billion) bailout deal from international creditors on March 19 following widespread anger inside and outside the country that it included a onetime tax on bank deposits.
After the rejection, German Finance Minister Wolfgang Schaeuble pointed out that two of Cyprus’s biggest banks are propped up by emergency liquidity from the European Central Bank.
"Someone needs to explain this to the Cypriots," he said.
Dutch Finance Minister Jeroen Dijsselbloem, who chairs the Eurogroup, also expressed frustration at the Cypriot parliament’s decision.
"It's disappointing, but at the same time it's clear that the offer from the eurozone and the Eurogroup to Cyprus still stands," he said. "The conditions, the size of the package, and the need to cut the debt also still stand. The ball is in Cyprus's court."
The European Commission said on March 20 that it was now up to Nicosia to present an alternative proposal, but said any proposal would have to be agreed by all involved.
Cypriot Finance Minister Michalis Sarris said his country will seek Russian financial help.
Sarris met with Russian counterpart Anton Siluanov and Russian Central Bank Chairman Sergei Ignatiyev on March 20 in Moscow.
After the meeting, Sarris said more talks would be needed "elsewhere."
"There were no offers, nothing concrete. We are continuing discussions," Sarris said. "We are happy with a good beginning and we are looking forward to continuing these discussions over the next few hours."
Sarris then went to meet with Russian Deputy Prime Minister Igor Shuvalov. President Vladimir Putin said he would not be meeting with Sarris.
Russia has a special interest in Cyprus's financial problems since wealthy Russians have deposited some $31 billion in Cypriot banks.
On March 18, Putin called the proposed bailout plan and subsequent levy on savings accounts “unfair, unprofessional, and dangerous.”
The Cypriot government is holding emergency meetings on March 20 after rejecting the EU and International Monetary Fund bailout proposal.
Cypriot government spokesman Christos Stylianides said a meeting was also under way at the Central Bank to discuss "plan B" for raising funds, without elaborating on the details of the plan.
The proposed bailout package would have obligated the Cypriot government to impose a 9.9 percent tax on those with more than 100,000 euros ($130,000) in savings; those with 20,000 ($26,000) to 100,000 euros would lose 6.75 percent of their savings.
Cypriot citizens reacted with outrage at the proposed deal and started withdrawing money from ATMs. The maximum amount that could be withdrawn was lowered to 800 euros ($1,000) on March 19.
Banks in Cyprus have not been open since the bailout deal was made public amid fears that depositors would withdraw all their savings.
Cypriot media reported the banks would remain closed until March 26.
With reporting by Reuters, AP, and dpa