IMF blocks Cyprus bailout agreement

The International Monetary Fund (IMF) is blocking a bailout agreement for Cyprus by insisting the merger of the Mediterranean island's two largest banks, the official Cyprus News Agency reported on Saturday.The agency quoted a senior official of the Cypriot side in the negotiations with international lenders as saying that "we are not even near an agreement with the troika."The official was also quoted as saying that lack of an agreement is entirely due to the inflexible stance of the IMF representative.She is raising new issues every half an hour, the official said, referring to Delia Velculescu, who heads the IMF delegation.The official familiar with the negotiations said, on condition of anonymity, that Velculescu is sticking to directions by IMF chief Christine Lagarde that the Bank of Cyprus be treated in the same way as the Cyprus Popular Bank.The European Central Bank and the European Commission have accepted the Cypriot position for the Bank of Cyprus to continue its operations after 20 percent of deposits over 100,000 euros (about 129,000 U.S. dollars) be exchanged with bank stock.The IMF insists that the bank be split in a good bank to take over guaranteed deposits of under 100,000 euros and good loans and the bad section to be left with deposits of over 100,000 euros and the bad loans be liquidated after some years.The same official said the IMF also insists that the good sections of the two banks be merged. (1 euro = 1.29 U.S. dollars)