They’ve only been looking for it for a day but Cyprus’s Plan B has already taken on mythical status. A myth it might remain.
Ideas being floated include nationalizing the pension fund (back of the envelope calculations suggest that will raise less than a billion euros) and issuing bonds underpinned by future natural gas revenues (but no one is really sure how much they are worth). So to avoid default it still looks like the Cypriots may have to return to the bank levy they rejected so decisively in parliament on Tuesday, to raise the 5.8 billion euros the euro zone is demanding in return for a bailout.
Finance minister Sarris is still in Moscow hoping for some change out of the Russians and is out this morning saying discussions are ongoing about banks and natural gas.
An existing 2.5 billion euros loan may be extended and on better terms – though there is some doubt even about that. But anything further looks much tougher to secure. Moscow will clearly adopt a “what’s in it for us” attitude and unless it gets its hands on untapped offshore gas reserves for a knock-down price it’s hard to see much money changing hands. The idea floating around yesterday that an essentially failed Cypriot bank could be bought for a chunk of cash seems somewhat fanciful.
Sarris said any help would have to make “economic sense” for Russia. If Moscow merely offered more loans, the euro zone and IMF would presumably say that takes Nicosia’s debts to unsustainable levels so it’s not clear that would work either. After likening the EU to a “bull in a china shop”, Russian Prime Minister Dmitry Medvedev mused this morning that Moscow might review the share of euros it holds in its reserves, saying what was done to Cyprus could happen to Spain or Italy. Medvedev meets a European Commission delegation headed by Jose Manuel Barroso later today. This increasingly feels like a Russian/EU powerplay with Cyprus as the pawn.