Cyprus' pols move to avert fiscal crisis

Police safeguarded employees of Laiki Bank in Nicosia Police safeguarded employees of Laiki Bank in Nicosia on Thursday as protesters rallied against political efforts that initially sought to seize bank assets. ATMs had long lines of customers seeking cash. (March 21, 2013) Photo Credit: EPA

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Cypriot politicians moved Thursday to restructure the country's most troubled bank as part of a broader bailout plan that must be in place by Monday to avoid financial ruin.

Worried customers rushed to get cash from ATMs as bank employees protested.

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) if it is to receive 10 billion euros ($12.9 billion) from its fellow eurozone countries and the International Monetary Fund. If it does not find a way by Monday, the European Central Bank said it will cut off emergency support to the banks, letting them collapse.

That would throw the country into financial chaos and, ultimately, could cause it to leave the eurozone, with unpredictable consequences for the region.

Party leaders and the government were hashing out three new laws last night, ranging from restricting bank transactions to restructuring the most troubled bank, Cyprus Popular Bank, or Laiki.

The pressure has increased since lawmakers on Tuesday rejected an earlier proposal to seize up to 10 percent of people's bank accounts. Banks have been shut since last weekend to avoid a run and will not open until Tuesday at the earliest.

Uncertainty grew among Cypriots as reports spread that the country's second-largest bank would be restructured.

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Queues of 40 to 50 people formed at the ATMs of Laiki, which responded by capping daily withdrawals at 260 euros ($340) per person from 700 euros ($906). Although ATMs have been functioning, many often run out of cash.

"We need cash. We have families, children, grandchildren and expenses, and the banks have been closed since Saturday," Andri Olympiou said after withdrawing money from a Laiki branch in Nicosia, the capital.

The central bank governor, Panicos Demetriades, urged lawmakers to vote immediately on a legal framework bill to rehabilitate Cyprus' banking sector.

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