The Next 72 Hours Will Determine Fiscal Fate Of Cyprus And Its Future As An EU Member

By Angelo Young | March 21 2013 5:31 PM

Cyprus protest Photo: Reuters A protester tries to pass through a police cordon during a protest by employees of Cyprus Popular Bank outside the parliament in Nicosia March 21, 2013. The Cypriot central bank denied reports and frantic rumors on Thursday that stricken Cyprus Popular Bank the island's second-largest lender, is to be closed down.

Tick tock, tick tock. ...

Time is running out for tiny European Union member Cyprus to decide how it’s going to come up with its half of a $13 billion bailout package. It has until Monday before the European Central Bank says it will let the country fend for itself, which would likely lead to a collapse of a financial system that accounts for a staggering 45 percent of Cypriot GDP.

Cyprus bank line Photo: Reuters People queue up to make a transaction at an ATM outside a branch of Laiki Bank in Nicosia March 21, 2013. Cypriot politicians searched desperately on Thursday for a "Plan B" to find billions of euros to clinch a European Union bailout and avert a financial meltdown after parliament rejected a bank deposit levy.

If that happens, few things short of a zombie apocalypse will keep Cypriots from bum-rushing their local bank branches trying to get their money back, and it would likely force an exit from the euro zone. On Thursday, Cyprus Popular Bank announced it was capping daily ATM withdrawals to €260 while Standard & Poor’s lowered the country’s sovereign debt rating to a dismal CCC.

Cyprus protest Photo: Reuters A protester yells at policemen during a protest by employees of Cyprus Popular Bank outside the parliament in Nicosia March 21, 2013.

Nicosia is trying to come up with an alternative to the ECB’s demand that it raid personal savings accounts in order to cough up the dough. Half of $13 billion is equivalent to about $5,800 for each of the country’s 1.1 million people, or about 21 percent of the estimated $26,900 per capita GDP. People are already clashing with police and lining up at banks, and matters could deteriorate rapidly if an alternative to letting the country’s financial system collapse isn’t found in the next 72 hours.

Photo: Reuters Eurogroup Chairman Jeroen Dijsselbloem testifies before the Economic and Monetary Affairs committee at the European Parliament in Brussels March 21, 2013. Large depositors in Cyprus' troubled banks must pay more towards an international bailout for the Mediterranean island to avoid placing an unfair burden on small savers, Dijsselbloem said on Thursday.

But Cyprus also is a piggy bank for Russian oligarchs, whose deposits make up nearly a third of the total. And on Thursday Eurogroup Chairman Jeroen Dijsselbloem said the Russians and other depositors of large amounts of cash – the proverbial one percenters of the financial system – should bear the brunt of the bailout sacrifice in order to spare the moms and pops from seeing their personal savings expropriated due to forces beyond their control. On Thursday a group of sympathizers staged a solidarity protest in Moscow, demanding the Kremlin stop expressing support for the Russian billionaires that are using Cyprus as an offshore shelter.

Russian protest for Cyprus Photo: Reuters Interior Ministry officers detain an activist of The Other Russia opposition group, who attempted to capture the headquarters of the Central Bank, in Moscow, March 21, 2013. The participants protested against the Russian capital exports and criticized the authorities supporting Russian oligarchs who have money on deposits in Cyprus, according to participants.