Cyprus bailout negotiations at 'elicate stage': govt

NICOSIA - Negotiations with international creditors on a bailout package for Cyprus were at "a very delicate stage" and would continue in the Belgian capital, the government of Cyprus said early Sunday.

Cyprus President Nicos Anastasiades would travel to Brussels early Sunday morning to continue the negotiations with the International Monetary Fund (IMF), European Central Bank and European Commission, known as the troika, said government spokesman Christos Stylianides.

"The situation is very difficult and the time limits are very tight," he said.

Cyprus has to hammer out a viable plan before finance ministers from the 17 countries that use the euro currency meet in Brussels in the evening to discuss the bailout.

In Brussels, Anastasiades and Finance Minister Michalis Sarris have scheduled meetings with European officials and the IMF director Christine Lagarde before the Eurogroup meeting.

The European Central Bank has threatened to stop providing emergency funding for the country's banking sector if a bailout is not agreed on by Monday.

Sources at the presidential palace said Saturday's negotiations were centered on a levy to be imposed on deposits in the Bank of Cyprus, the island's largest lender.

The official Cyprus News Agency reported on Saturday that the IMF was blocking the bailout agreement for Cyprus by insisting the merger of the Mediterranean island's two largest banks.

A senior Cyprus official involved in the negotiations was quoted as saying that "we are not even near an agreement with the troika" due to the inflexible stance of the IMF representative.

Delia Velculescu, who heads the IMF delegation, insisted that the Bank of Cyprus be treated in the same way as the Cyprus Popular Bank, said the official who spoke on condition of anonymity.

The IMF insists that the bank be split into two sections: one to handle deposits below 100,000 euros (129,000 dollars) and also good loans and the other to take over larger deposits and bad debts.

The European Central Bank and the European Commission have accepted the Cyprus offer for the Bank of Cyprus to continue operations after 20 percent of the deposits over 100,000 euros (about $129,000) be exchanged for bank stock.

Cyprus has been demanded to raise 5.8 billion euros ($7.5 billion) in order to secure 10 billion euros ($12.9 billion) in rescue loans from other European countries that use the single currency and from the IMF.

The troika has estimated Cyprus' financial needs until 2016 at about 17 billion euros ($21.9 billion), a sum equal to the island nation's GDP.

Also on Saturday, thousands of bank employees took to the street to express their concerns about losing jobs.

Several hundred employees will be laid off after a decision made to consolidate the Cyprus Popular Bank by splitting it into two sections.