News: Bailout Deal in Cyprus

If you have been watching the news, no doubt you've heard about the bailout crisis in Cyprus. Today it was reported that a solution to this problem may be possible. The European Union has set some guidelines for the bailout to which Cyprus must adhere. It is expected that they will reach an agreement today so that parliament can approve of specific measures that will fall within these guidelines.

This news came a couple hours after the Cypriot finance minister left Moscow empty-handed due to Russia turning down their appeals for aid. This left the island without any other option than to make a bailout deal with the EU. An agreement must be reached before Tuesday or Cyprus will face the collapse of its financial system.

Now Cyprus is left with a short deadline to find 5.8 billion euros which were demanded by the EU in return for a 10 billion euro ($12.93 billion) bailout. Without it, Cyprus's emergency funds would be cut off by the European Central Bank and the result could quite possibly push Cyprus out of Europe's single currency.

One of the proposed plans involved luring Russian investors to cut-price Cypriot banks and gas reserves since wealthy Russians have billions of euros at stake in Cyprus's crippled banking sector. However, after intense talks regarding the crisis, Russia has officially ended the talks without any results. It turns out Russian investors are not interested in Cypriot gas.

Lawmakers are still debating measures proposed by the government to raise the 5.8 billion euros in order to receive the bailout. They considered a "solidarity fund" that bundled state assets, including future gas revenues and nationalized pension funds, as the basis for an emergency bond issue.

Another idea involved a restructuring bill that would split Cyprus Popular Bank into good and bad assets. The government would also call for the power to impose capital controls to stem a flood of funds leaving Cyprus when the banks reopen on Tuesday after being shutdown for a week.

Unfortunately, Cyprus's partners in the 17-nation currency bloc are becoming increasingly unimpressed. Even the citizens are growing angry. On Thursday, there were long lines at ATMS full of Cypriots who were outraged that the deal would involve a levy on bank deposits.  Hundreds of demonstrators also gathered outside of parliament after hearing rumors that Popular Bank would be closed down and its staff laid off.

Right now, the only hope Cyprus seems to have is to receive that bailout. We will know more regarding the situation later in the day.

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