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Cyprus sets up investment fund

Mar 21 2013 14:13

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Nicosia - Cyprus politicians Thursday agreed to set up an investment fund as part of a Plan B to secure a bailout deal with eurozone lenders, while ruling out a tax on bank deposits that sank an earlier deal.

"Following a proposal by (President Nicos Anastasiades), there was a consensus reached and a unanimous decision was taken for the setting up of an Investment Solidarity Fund," government spokesman Christos Stylianides said in a statement.

Other political leaders emerging from a crisis meeting with Anastasiades to hammer out a revised bailout plan said the subject of a "haircut" on bank deposits had been ruled out completely.

Stylianides said the proposal for the fund was being processed by government lawyers, while Averof Neophytou, acting leader of the ruling Disy party, said that if it is ready, "certainly it will be before (parliament) this afternoon".

Parliament was to meet at 14:00 GMT for its weekly scheduled meeting.

"I want to believe we will find a solution to avoid bankruptcy of this country and we will manage this," Neophytou said.

European Party leader Demetris Syllouris told reporters after the meeting that "a haircut is not even on the margins", while parliamentary speaker Yiannakis Omirou said, "The haircut was not discussed, it was not on the table."

No details were released of how the fund would be constituted but media had earlier reported it would comprise proceeds from the nationalisation of state and private provident funds and from bonds issued against future natural gas revenues.

Phileleftheros newspaper said this would raise around €3.5bn of the €5.8bn Cyprus is required to amass to secure the eurozone bailout. It was not immediately clear how the remaining funds would be raised.

Cyprus is seeking ways to secure funding for its banks after lawmakers on Tuesday flatly rejected a highly unpopular measure that would have slapped a one-time levy of up to 9.9% on bank deposits as a condition for an EU-led €10bn loan.

The €5.8bn the proposal would have raised was crucial to Nicosia getting the full rescue. With that now in doubt, Cyprus must find other ways to raise cash to repay its debts.

The revised plan was hastily drawn up after Finance Minister Michalis Sarris failed to make any progress in Moscow talks to secure aid, as a tough-bargaining Russia sought lucrative assets in exchange for more help.

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