Cyprus rushes bailout plan as clock ticks

People line up to use an ATM outside a closed Laiki Bank branch in Nicosia, Cyprus, on Thursday. When lines swelled, the bank responded by capping daily withdrawals at 260 euros, or $340, per person.

Associated Press

People line up to use an ATM outside a closed Laiki Bank branch in Nicosia, Cyprus, on Thursday. When lines swelled, the bank responded by capping daily withdrawals at 260 euros, or $340, per person.

NICOSIA, Cyprus — 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. Concerned customers rushed to get cash from ATMs as bank employees protested.

Cyprus has been told it must raise 5.8 billion euros if it is to receive 10 billion euros 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, cause it to leave the eurozone, with unpredictable consequences for the region.

Several new bills were being submitted to Parliament on Thursday night, including restructuring the banking sector, setting up an "Investment Solidarity Fund" and restricting banking transactions in times of crisis. Together, they will make up at least part of the alternative plan Cyprus hopes will secure it bailout money. The lawmakers said the bills would be discussed and potentially voted on this morning.

The pressure has increased since Parliament on Tuesday rejected a 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 was growing among Cypriots as the deadline approached and it became clear that the country's second-largest bank, Laiki, or Cyprus Popular Bank, would be restructured, a move that would raise an estimated 2 billion euros.

Lines of 40 to 50 people formed at Laiki ATMs, which responded by capping daily withdrawals at 260 euros, or $340, per person.

Officials said the restructuring would split Laiki into two, with a "bad bank" taking over its soured investments, and a "good bank" retaining the healthy ones.

Without the restructure, Laiki would collapse and drag down the rest of the banking system and the economy, officials said.

Cyprus rushes bailout plan as clock ticks 03/21/13 [Last modified: Friday, March 22, 2013 12:10am]

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