European Union leaders negotiated on Wednesday with the Cypriot government over revising a financial rescue plan that lawmakers on the tiny island nation defeated the day before, while Russia hosted Cyprus' finance minister, who came to Moscow pleading for financial assistance.
Finance Minister Michael Sarris arrived in Moscow earlier this week to ask Vladimir Putin's government to inject money into Cyprus banks, whose biggest customers by far -- an estimated €30 billion -- come from Russia and who stand to lose the most if Cyprus banks fail and the nation defaults on its sovereign debt.
A news conference by Sarris had been scheduled for Wednesday 6 a.m. New York time but was canceled. Early Wednesday he characterized his talks with Russian leaders as "very constructive."
In Nicosia, meanwhile, President Nicos Anastasiades and central bank leaders were occupied with two challenges: negotiating with leaders of the so-called troika -- the European Union, the International Monetary Fund and the European Central Bank -- for a less severe rescue package and deciding how much longer to keep banks closed.
Over the weekend Cypriots learned that their government planned to take money out of their accounts -- 6.75 percent or 9.9 percent, depending on the size of one's balance -- to meet troika demands. Cypriots promptly flocked to automatic teller machines to withdraw as much money as they could. Because banks were closed, and they remain closed, depositors were unable to take all their money out of banks.
One possible outcome of Russia's talks with Sarris -- who characterized the ongoing talks as "very constructive, very honest ..." -- could have Russia gaining a naval base on Cyprus. Cyprus is asking Russia to extend the maturity of an existing €2.5 billion loan, due in 2016, by five years. It also wants the loan’s 4.5 percent interest rate to be cut. Finally, Cyprus is asking Russia to contribute toward recapitalizing at least one local bank.
One unknown is whether or not Germany and the euro zone's creditor nations will give the troika a nod to ease lending terms.
Cyprus may need more than merely human help, and it may be getting it. The head of the nation's dominant religion, eastern Orthodoxy, offered to put the church's considerable assets at the government's disposal, the Associated Press reported. Its holdings include real estate, bank equity and a brewery.