After long delay, Eurogroup meets to discuss deal between Cyprus and troika

Eurozone finance ministers were to start talks in Brussels at about 1.30 a.m. Greek time to discuss a bailout for Cyprus after the country’s President Nicos Anastasiades held talks with European Union and International Monetary Fund officials for several hours.

The Eurogroup meeting in Brussels had been due to start at 7 p.m. Greek time on Sunday but ministers were kept waiting as Anastasiades held talks with European Commission President Jose Manuel Barroso, European Council chief Herman Van Rompuy, European Central Bank head Mario Draghi, European Economic and Monetary Affairs Commissioner Olli Rehn and International Monetary Fund managing director Christine Lagarde.

It appeared that after much disagreement, all parties arrived at a blueprint that was to be put to eurozone finance ministers for approval.

"It seems that the whole process is nearing an agreement," Cypriot parliamentary speaker Yiannakis Omirou told reporters in Nicosia. "A proposal is taking shape, an agreement, a program ... that will put in the next half hour, or hour, to the Eurogroup," he said.

Kathimerini understands that the hold-up was caused by differences between Nicosia and the IMF over the potential merger of Cyprus Popular Bank (Laiki) and Bank of Cyprus following a resolution process.

The IMF and Germany insist that after being split into a good and bad bank, “good” Laiki should be merged with Bank of Cyprus and the new lender should then assume liability for the 9 billion euros that Laiki received as Emergency Liquidity Assistance (ELA) from the European Central Bank.

Anastasiades reportedly rejected this proposal and warned Lagarde that he would be forced to resign if the IMF insisted on it.

Furthermore, deposits that are above 100,000 euros, and therefore uninsured, at the Bank of Cyprus face a deposit tax of between 30 and 40 percent, as Nicosia tries to raise the funds demanded by the troika to qualify for a 10-billion-euro bailout.

Sources suggested that deposits at other banks in Cyprus would be spared a haircut, as would savings under 100,000 euros at Laiki and Bank of Cyprus.