ECB to uphold emergency funding to Cyprus

The European Central Bank warned Thursday it will only continue to provide emergency funding to Cyprus until next Monday as the debt-hit country scrambles to secure funding for its banks. "The governing council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, March 25. Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks," the ECB said in a short statement. Already on Wednesday, ECB executive board member Joerg Asmussen had hinted that Cyprus' banks could not count on the ELA emergency funding if Nicosia did not agree to a bailout deal, complete with a restructuring of its banking system. The ECB can only provide funds to banks that are solvent, and their solvency would not be assured "if an assistance programme for Cyprus that guarantees a rapid recapitalisation of the banking sector is not agreed upon soon," Asmussen said. Cypriot leaders are to decide Thursday on a newly drawn-up plan aimed at securing a bailout for the near-bankrupt eurozone member, after parliament rejected a controversial tax on savings. President Nicos Anastasiades is to present a "Plan B package" to party leaders at the presidential palace, after he chaired an emergency Cabinet meeting called to weigh the alternative plan on Wednesday. The proposals, which might still include a controversial bank levy in some form, were put forward at the Cabinet meeting called to end a crisis that has forced the authorities to shut the Mediterranean island's banks for 10 straight days. 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 percent on bank deposits as a condition for an EU-led 10-billion-euro (US$13b) loan. The 5.8 billion euros 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.