IMF representative disputes Cypriot plan

The International Monetary Fund is disputing the viability of the Cypriot government’s plan for its banking sector, raising new obstacles to reaching an agreement that is urgently needed to avert a default.

The fund’s representative in Cyprus, Delia Velculescu believes that the plan to save the island’s ailing credit industry must include a breakup of Bank of Cyprus as well as that for Cyprus Popular Bank, with the good parts of the two lenders merging into one.

Originally the Fund had appeared to agree to the plan, according to sources from the Cypriot government.

Sources point to a government displeasure with the conduct of Draculescu in negotiations.

An additional problem that has emerged concerns the repayment of the 9 billion euros from the emergency liquidity assistance (ELA) mechanism of the European Central Bank that CPB has received.

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